Quiz 2 - KSS(I)

The feature of a well-functioning investment industry that gives investors the ability to quickly buy and sell a significant amount of an investment without having a material impact on the price is described as:

• Risk transfer

• Liquidity

• Competitive markets

• None of the above

Which of the following statements regarding risk-averse investors is true?

• They only care about the rate of return

• They do not invest in risky investments

• They would invest in risky securities only if they are compensated with commensurate returns for the risk

• They would accept risky investments that offer excess returns over the risk-free rate

What is the role of banks in the dematerialization process?

• They maintain accounts by CDSL/NSDL

• They update accounts of investors

• They act as intermediaries

• All the above

Certain bonds are backed by cash flow from projects and are sold to finance a particular project. These types of bonds are called

• Project bonds

• Finance bonds

• Financing bonds

• Revenue bonds

Investment -- 1

Portfolio return: 20%

Risk free rate: 10%

Standard Deviation: 5

Investment -- 2

Portfolio return: 30%

Risk free rate: 10%

Standard Deviation: 40

Which of the above investments would perform better?

• Investment 1

• Investment 2

• Both would perform equally well

• Insufficient Data

Which of the following is not a characteristic of an Arbitrage Fund?

• The long exposures for security will be covered with a short position in the futures segment or at another exchange.

• Since the portfolio does not carry open exposures for equity securities, the investors are exposed to a significant amount of investment risk. 

• Such funds need to invest at least 60% of the portfolio in equities and equity-related instruments. 

• The Arbitrage Funds in India may also look out for differential pricing of the stocks in BSE and NSE and trade concurrently to generate returns.

Which of the following is true for mutual funds in India?

• Exit load is not allowed 

• Entry load is allowed 

• Entry load is not allowed 

• Exit load allowed is some cases

Which of the following statements about Equity Markets is not true?

• Equities tend to beat inflation by a wide margin over a longer-term

• Investing in Equity is ideal for capital growth in the long term.

• Stocks can be purchased through direct stock purchase or by Equity mutual funds.

• No brainer strategy:

  Buy Index funds for the short term

Which of the statements about capital tax gains is correct?

• Capital gains tax on short-term gains is levied at 10%.

• The taxes on income from capital gains is much lower than the general tax slab which can go as high as up to 30-40%.

• Taxes on long-term gains are levied at 15%.

• None of these

How do you calculate a company’s market capitalization?

• Assets times liabilities

• Dividend per stock times stock price

• Average employee wage times stocks outstanding

• Stocks outstanding times stock price