AS 05 (iv) - Finance and Investment Mock Test 06
This section covers important concepts in mutual funds, taxation, fixed-income securities, derivatives, debt markets, postal savings, and investment analysis. It explains the classification of Non-Performing Assets (NPAs) in mutual funds, calculation of the Treynor Measure, taxation of Long-Term Capital Gains (LTCG) on real estate, features of preferred stock, the launch of UTI's INDIA Fund, futures speculation, technical analysis for market timing, put options as downside protection, the procedure for purchasing Kisan Vikas Patra (KVP), and Commercial Papers in the Indian debt market. These concepts strengthen understanding of investment products, risk management, portfolio evaluation, and financial market operations.
1. When is an asset classified as a 'Non-Performing Asset (NPA)' in a mutual fund?
A. When the security's market price falls below par value
B. When the interest and/or principal amount has not been received or has remained outstanding for one quarter; classified as NPA after lapse of a quarter from the date on which payments were due
C. When the fund's NAV falls below ₹10
D. When the security is downgraded by a credit rating agency
E. When the issuer company reports losses for three consecutive years
2. In the Treynor Measure example, Fund C has mean return 13%, beta 1.2, risk-free rate 6%. The Treynor Measure is:
A. 5
B. 5.45
C. 4.44
D. 5.83
E. 6
3. A real estate investor bought a house for ₹50 lakhs and sold it for ₹80 lakhs (after indexation benefit, indexed cost = ₹65 lakhs). What is the LTCG, and at what rate will it be taxed?
A. ₹30 lakhs LTCG; taxed at 20%
B. ₹15 lakhs LTCG (₹80 lakhs − ₹65 lakhs); taxed at 20%
C. ₹30 lakhs LTCG; taxed at 15%
D. ₹15 lakhs LTCG; taxed at 30%
E. ₹50 lakhs LTCG; taxed at 10%
4. Which of the following statements about Preferred Stock as a fixed income security is TRUE?
A. Preferred stockholders are creditors of the company
B. Preferred stock dividend payments are mandatory and must be paid before equity dividends
C. Preferred stock represents ownership interest and dividend payments are made to preferred stockholders as a distribution of company profits; preferred stockholders generally receive a contractually fixed dividend payment
D. Preferred stock is identical to a debt obligation in all respects
E. Preferred stockholders have no claims over equity shareholders
5. What was 'INDIA Fund' launched in August 1996?
A. The first government-guaranteed mutual fund
B. The first Indian offshore fund launched by UTI
C. India's first equity-linked savings scheme
D. India's first index fund
E. The first money market mutual fund in India
6. In the speculation illustration where Ram buys 50 Nifty futures at 5000 and sells when Nifty rises to 5050, what is his net gain?
A. ₹500
B. ₹1,000
C. ₹2,500
D. ₹5,000
E. ₹25,000
7. What type of analysis does a fund manager primarily use when trying to determine the TIMING of buying or selling equity securities?
A. Fundamental Analysis
B. Quantitative Analysis
C. Technical Analysis (study of historical data on share price movements and trading volume to determine market timing)
D. Macroeconomic Analysis
E. Qualitative Analysis
8. A 'Put option' is:
A. An option to buy a stock at a specific price on or before a certain date
B. A contract that gives the seller the right to buy at a specified price
C. An option to sell a stock at a specific price on or before a certain date; put options provide downside protection similar to insurance
D. A mandatory obligation to sell the underlying asset at expiry
E. A futures contract with a put-back provision
9. Which of the following is the correct description of how KVP is purchased from a post office?
A. Only by electronic transfer
B. Only through an agent
C. By presenting an Application Form at a Post Office; payment can be made in cash, by locally executed cheque, demand draft, or pay order drawn in favour of the Postmaster
D. Only through internet banking
E. Only by postal money order
10. What is a 'Commercial Paper' in the Indian Debt Market?
A. A short-term paper issued by commercial banks
B. A negotiable instrument issued by corporate bodies with maturity varying between 3 months and 1 year
C. A long-term bond issued by the government
D. A debenture issued by financial institutions
E. A promissory note issued by retail investors
