1) What is the maximum amount Rananjoy can offer to buy a house which requires an investment of

Rs.125,000, Rs.50,000, Rs.65,000 and Rs.75,000 at the end of the first, second, third and fourteen months
respectively for restoration before sale? Rananjoy expects to sell this house at the end of 26 months for
Rs.25,80,000.
Note : Brokerage on house 2% and expected rate of return is 8% pa. (For calculation purpose compounding to
be done on a monthly basis)
a) Rs.12,15,281
b) Rs.11,68,090
c) Rs.12,27,280
d) Rs.11,44,251

2)Ravi Sharma has lent his brother Rs. 40,000. The loan is to be paid in monthly equal installments over the
next five years at an interest rate 10%. What is the amount of interest income received by Ravi in the first year
assuming that Ravi Sharma has to pay 30 % of his income as taxes?
a. 2955
b. 2595
c. 2734
d. 3622

3)You are considering taking a passenger with you when you go home over Christmas break. She lives 100 km
out of your way, and the total trip is 500 km. She has offered Rs.500 for the service. You estimate the total cost
of the trip at Rs.3000. You should
a) Reject the offer since 20% (1000/5000) of Rs.3000 is greater than Rs.500.
b) Accept the offer if the opportunity costs of the trip is greater than Rs.2500.
c) Accept the offers if marginal costs associated with 100 kms are less than Rs.500.
d) Data Insufficient

4)A corporate bond has a modified duration of 8. The approximate price change for this bond, given a rise in
interest rates of 75 bp is
a) An increase in the price of approximately 6.6%
b) A decrease in the price of approximately 6%
c) A decrease in the price of approximately 6.6%
d) A decrease in the price of approximately 12.36%

5)Mr. Khan is holding a 8% coupon paying callable bond of ABG Ltd. maturing after 10 years. The bond is
scheduled to be called after 5 years. If the interest rate prevailing in the market is 9%, calculate the Yield to
Call?
a) 9.00%
b) 9.25%
c) 9.67%
d) 9.99%

6)If the initial margin requirement is 45% and the maintenance margin requirement is the most that could be
borrowed in order to buy the stock by an investor purchase 100 shares of the stock which has a current price
of Rs.16.75?
a) Rs.117.25
b) Rs.837.50
c) Rs.921.25
d) Rs.753.75

7)The Geometric Mean of the stock of XYZ Ltd. is 11%, using the following information calculate the return
generated by the stock in the year 2003.
Year Return
2003 R=?
2004 25%
2005 10%
2006 -5%
2007 -23%

a) 6.7525%
b) 67.52%
c) 33.48%
d) 3.48%

8)The cash purchase price of an item is Rs. 2,00,000. The selling company however offers installment plan,
which allows an immediate payment of Rs. 10,000 and a series of 5 half-yearly payments thereafter. The first
installment is payable after one and a half year. If the company wants rate of interest of 10% P.A. compounded
half-yearly, what will be the half-yearly installment?
a) Rs.43,885
b) Rs.48,383
c) Rs.50,802
d) Rs.29,412

9)Dr. Monica aged 38 years earns Rs. 60000 p.m. Her income is expected to grow 7% p.a. If she saves 15% of
her income p.a., what would be the accumulated amount of savings when she retires at age 60 years?
(Indicate nearest figure). Note : Interest rate = 8%
a) Rs.1,20,70,000
b) Rs.1,08,65,900
c) Rs.1,15,66,300
d) Rs.1,20,32,280

10)You are trying to decide between two funds. The risk free rate is 8% and the market return is
12%. Average return on Fund A is 18% and that on fund B Is 16%. The SD for Fund A and B is
20% and 15% respectively.
What is the Treynor performance measure for fund A and B? Which is better?
What is the Jensen’s measure for fund A and B? Which is better?
A B Risk free Market return
Ret 18 16 8 12
SD 20 15
Beta 0.8?? 0.5??
Sharpe 0.5 0.533333
Treynor 12.5 16
Jensen's measure 6.8 6

11)Calculate the duration of bond A and bond B with 7% and 8% coupons having
maturity period of 4 years. Face value is Rs. 1000/-. Both bonds are currently
yielding 6%

12) The risk free return of Security A is 8%. In addition to it, you expect that the return on
market would be 14%. The
expected return of Security A with beta of 0.70 is ________. (2)
a) 12.2%. (I am getting an answer as 12.2)
b) 15.4%.
c) 17.8%.
d) 18.2%.
Solution (c)
13. The expected return and standard deviations of stock A & B are:
Stock Expected Return Standard Deviation
A 15% 10%
B 5% 18%
Amit buys Rs.20,000 of Stock A and sells short Rs.10,000 of Stock B using all the
Proceeds to buy more or Stock A. The correlation between the two securities is .35.
What are the expected return & standard deviation of Amit’s portfolio?
(a) 3.5%, 15.5%
(b) 8.8%, 7.03%
(c) 20% , 14.5%
(d) 9.8%, 15.6%
Expected Return = (1.5 * 15%) + (-.5 * 5%) = 20%
(S) P = [(1.5)2 * (10)2] + (-.5)2 * (18)2 +
[(2* 1.5* -.5* .35* 10*18)]1/2
= (211.5)1/2 = 14.5% (How did the Weights of 1.5 & -0.5 Came)

14.During identification of new business opportunities, one of Sahil’s friends has offered him a business
proposal. In this proposal a partnership firm consisting of two partners, Sahil and his friend, shall take the
franchise of a reputed pathology lab in which their investment and profit sharing ratio shall be equal.
Franchise rights shall be valid for 5 years and the project requires an upfront investment of Rs. 30 lakh for
required infrastructure. This may be sold to the company after 5 years, applying straight line depreciation
@10% p.a.
The projected profits from the firm are as follows:
Year 1 → 2.20 lakh
Year 2 → 4.14 lakh
Year 3 → 6.17 lakh
Year 4 → 6.50 lakh
Year 5 → 7.70 lakh
Sahil wants to know what IRR he shall earn on his investment from this project.
a) 3.24%
b) 8.65%
c) 12.08%
d) 16.44%

15.For the Charity Fund to be set up by Ragini, you suggest that Ragini should invest a certain amount, right
now, in a deferred annuity plan, which shall earn and distribute 8% p.a. of the corpus in perpetuity. Her father
Tarun wants to know what amount needs to be invested in this scheme now so that Ragini receives Rs.1 Crore
each year, forever, from the beginning of the 6th year from today. (Assume yield remains 8% p.a. in
accumulation phase as well as distribution phase).
a) Rs.9.19 Crore
b) Rs.8.51 Crore
c) Rs.10.62 Crore
d) Rs.11.73 Crore

16.The NAV of a debt oriented Mutual Fund is 22.25 cum dividend. It has declared a
dividend of 6%, record date being 25th June 2006. Calculate the dividend
receivable by an individual investor if he holds 10,000 units – Marks : 2
(a) Rs. 4,653.60
(b)Rs. 6,000.00
(c) Rs. 5,158.50
(d)Rs. 5,250.00
Q17. Suppose a stock index has a current value of 4000. If The risk- free rate is 9%
and the expected yield on the index is 3%, what should be the price of a 6 months
maturity future contract?

18. You are given the following information about stock X & Stock Y
(Rx – Rm)= 2% + 1.5( Rm – Rf)
(Ry – Rm)= 3% + 1.0( Rm- Rf )
I. Rate of Risk free security is 7%. If the market portfolio is expected to generate 14% for
the year, what is the Expected return on Stock X?
(a) 12%
(b) 16.5%
(c) 15%
(d) 17.5%
II. What is the Expected return on Stock Y
(a) 19%
(b) 18%
(c) 16.5%
(d) 17.5%

19. Which of the following factors will increase in the duration of a corporate bond?
(i) An increase in the number of years to maturity
(ii) A decrease in coupon rate
(iii) Change from Annual to Semi-annual coupon payment
(iv) Change from Annual coupon to zero coupon
(a) (i), (ii) and (iii) only
(b) (i), (ii) and (iv) only
(c) (i), (iii) and (iv) only
(d) (ii), (iii) and (iv) only

20. Mr.Monaj has been investing Rs.35,000 in an Equity mutual fund scheme in the
beginning of each year for the last 10 years to accumulate funds for his children
higher education. Each child will spend 3 years at college, starting from their
respective age 21 years. The current costs of higher education in college are
expected to increase at 6% year on year. Mr.Monaj wants to know the amount he
should be investing in the beginning of every month, starting immediately and up
to the year just prior to the first withdrawal, to pay for his childrens' higher
education requirements. For calculation purpose assume that educational
expenses are withdrawn at the beginning of each year in the year of requirement.
Additional Information: 1. Current Age: Elder child - 16 years , Younger - 12
Years 2. Current cost of higher education is Rs. 300,000p.a 3. Rate of Return for
Equity investment is 12% p.a (CAGR)
1 Rs.8351
2 Rs. 8469
3 Rs. 8273
4 Rs.8840
5 Not Attempting
Explanation:
Solution: Step 1: Find NPV of the entire cashflow requirement of higher education as on
today date.(Use Cashflow mode) NPV = 11,66,920 (How is this obtained) Step 2 :Find FV
of regular investment of last 10 years Set= BGN, N= 10, I = 12, PMT= -40000, FV= Solve
(786183), P/y= 1, C/y =1 Step 3: Difference between amount accumulated FV) and
Amount required NPV = 380736 (Shortfall) Step 4 : Find PMT to achieve the shortfall
amount Set= BGN, N=5*12, I = 12, PMT= Solve (8273), PV= -380736, P/y= 12, C/y =1
21.Security A gives a return of 12% with a dispersion of 4%, while security B gives
return of 15% with a dispersion of 5%.Which security is more risky?
1 Security B
2 Both securities are equally risky
3 Security A
4 Neither of the securities is risky
5 Not Attempting
Assume you advice Jay to invest Rs.70,000/- into Fund A and Rs.30,000/- in Nifty. Changes in Nifty account for or explain 25% of the
returns for Fund A. If Fund A has a standard deviation of 20% and Nifty has a standard deviation of 11.5%, what is the standard deviation
of the combined Rs.1,00,000/- portfolio as advised by you?
a) 15.0%
b) 15.2%
c) 16.0% ??
d) 17.5%

The NAV of a debt oriented Mutual Fund is 22.25 cum dividend. It has declared a dividend of 6%, record date being 25th June 2006.
Calculate the dividend receivable by an individual investor if he holds 10,000 units.
a) Rs.4,653.60
b) Rs.6,000.00
c) Rs.5,150.25
d) Rs.5,250.00

Assume a company has issued ten lakh equity shares and its current market price is Rs.80. Last years. Profit was Rs.90 lakh out of which
Rs.50 lakh was distributed as dividend. What is the earning yield?
a) 8.89%
b) 11.25%
c) 6.25%
d) 16.67%

A Firm's Current Ratio is 1.4, Current Liability is Rs.1600, Acid Test Ratio is 1.2, and Inventory Turnover Ratio is 8. What would be the cost
of goods sold for the firm?
a) Rs.2240
b) Rs.1920
c) Rs.2560
d) Rs.2750

John has an investment with an annual income of Rs.100 and current value of Rs.6,000. If the value of the market is expected to rise to
Rs.7200 by end of 3 years, the approximate yield on the investment is
_______ %
a) 7.25
b) 7.58 (I am getting =RATE(3;100;-6000;7200) = 7.85)
c) 7.85
d) 8.02

Satish wants to accumulate Rs.1 Crore in 15 year time. For this purpose he has decided to invest on a regular basis in Equity and Debt MF.
To start with he will invest 70 % of money in equity and remaining in debt. This will continue for 7 years after which the ratio for further
investments will be reversed to 70 % in debt and remaining in equity. Expected rate of return from equity is 13% and from debt is 7.5%.
How much money should Satish invest every year?
a) 289753
b) 213675
c) 255630
d) 321572

Returns on a security held for 5 years by Praveen are: First year 7%, second year 3%, third year -9%, fourth year 6%, fifth year 10%. Find
the standard deviation of the security.
a) 8.00%
b) 2.74%
c) 7.37% ( I am getting 7.36%)
d) 8.5%
By your recommendation Ajay has invested a sum of Rs. 25,000 in an equity Mutual Fund which is closed end for five years. The Mutual
Fund Asset Management Company has collected Rs.100 Crore in NFO of this closed end fund. The initial issue expenditure is Rs.8 Crore.
What would be the value of his investment in this closed end fund upon allotment?
a) Rs.24,800
b) Rs.24,375
c) Rs.23,000
d) Rs.24,994

stock of face value Rs.10 is currently priced at Rs.175. The company paid a dividend of 230% in the previous fiscal year and the absolute
amount of dividend is expected to grow by on an average 6 % year-on-years. It has a beta of 0.9. You expect the market to give a return of
14% while the risk-free rate is 7%. You find out the extent of undervaluation or overvaluation of the stock by dividend discount method,
and state that ______.
a) Undervaluation Rs.64
b) Over Valuation Rs.64
c) Over Valuation Rs.36
d) Under valuation Rs.36

You manage a Rs.10, 00,000 portfolio. You are expecting to receive an additional Rs.6, 50,000 from a new client. The existing portfolio has
a required return of 12 %. The risk-free rate is 5 % and the return on the market is 14%. If you want required return on the new portfolio
to be 16%, what should be the average beta for the new stocks added to the portfolio?
a) 2.10
b) 1.08
c) 1.73
d) 1.85 (I am getting 1.90)