AS 05 (iv) - Finance and Investment Mock Test 09

1. How do real estate agents/brokers typically earn their compensation?

A. A fixed salary paid by the government
B. They are usually compensated as a percentage of the purchase price of the property
C. A flat fee per transaction regardless of price
D. Commission based on the number of transactions per year
E. Government subsidy for property transactions

2. What is the purpose of taking life insurance for a property buyer with a mortgage?

A. To get a refund on the mortgage registration fees
B. Beneficiaries receive money if the insured dies, helping cover outstanding mortgage debts so the property does not need to be liquidated to repay the loan
C. To reduce the EMI on the mortgage
D. To get tax benefits on stamp duty
E. To insure the property against natural disasters only

3. Which of the following types of bonds has the coupon rate that can be reset periodically over the bond's life?

A. Zero Coupon Bonds
B. Floating Rate Securities
C. Bullet Maturity Bonds
D. Treasury Bills
E. Government Dated Securities

4. The key difference between Treynor and Sharpe measures is:

A. Treynor uses total risk; Sharpe uses systematic risk
B. Treynor uses systematic risk (Beta); Sharpe uses total risk (Standard Deviation)
C. Both use the same risk measure
D. Treynor is for individual stocks; Sharpe is for portfolios
E. Treynor uses variance; Sharpe uses covariance

5. According to the chapter, which of the following is a condition for the Post Office RD Protected Savings Scheme to pay full maturity value to the nominee upon death of the depositor?

A. The account must be at least one year old
B. The account must not have become a discontinued account, and the first 24 monthly deposits must have been made without default
C. The depositor must have paid all 60 deposits
D. The account must have been opened jointly
E. The depositor must be above 60 years of age

6. When an investor buys a bond with the intent to hold it to maturity and the actual reinvestment rate turns out to be different from the YTM assumed rate, what will happen?

A. The investor will receive exactly the computed YTM
B. The investor's realized yield will differ from the computed YTM
C. The investor will receive more than the computed YTM
D. The investor will receive zero return
E. The investor's coupon payments will adjust automatically

7. Which of the following correctly describes selecting individual securities within an asset class to achieve superior returns relative to that asset class?

A. Market Timing
B. Portfolio Rebalancing
C. Security Selection
D. Strategic Asset Allocation
E. Dynamic Rebalancing

8. Options are:

A. Contracts obligating the buyer to purchase an asset
B. Contracts that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date
C. Agreements to buy now and pay later
D. Standardized Forward Contracts
E. Agreements to buy government bonds at face value

9. Which of the following is TRUE about Bonds in the capital market?

A. Bonds are traded on stock exchanges, not in a separate market
B. Bonds are traded in a separate bond market, also known as the debt, credit, or fixed-income market; Treasury Bills and Debentures are capital market instruments and are generally considered more secure than many other investments
C. Bonds are the same as equity shares
D. Bonds are traded only in the primary market
E. Bonds cannot be used as capital market instruments

10. For Capital Gains taxation in Mutual Funds, when is the tax applicable?

A. On unrealized gains in the portfolio
B. On accrued income from debt instruments
C. Only when you sell your units in the fund; there is no tax on unrealized or merely accrued gains, and taxation depends on the holding period and the type of mutual fund
D. At the time of purchasing units
E. Annually on the year-end portfolio value