Securites Market Baic

NCFM Model Test Paper
SECURITIES MARKET (BASIC) MODULE
Maximum Marks: 100
Test Duration: 105 minutes
Pass Marks: 60
Time Left: 69:48 minutes
Correct answers are shown in green. Attempted answers, if wrong, are in red.
1.What is the outstanding position on which initial margin will be calculated if Mr. Madanlal buys 800 units @Rs.1060
and sells 450 units @Rs.1055? [ 2 Marks ]
(a) 800 units
Q1
(b) 1250 units

(c) 450 units
(d) 350 units
(e) I am not attempting this question
Which of the following does NOT invite penalty points? [ 2 Marks ]
(a) nonpayment of funds obligation
Q2
(b) short delivery

(c) inadequate stamp duty on transfer deed
(d) bad delivery
Who issues the registration to a Mutual Fund in India? [ 2 Marks ]
(a) Only RBI
Q3
(b) RBI for all types of Mutual Funds and additional permission from SEBI in case of a Mutual Fund
subsidiary of a bank
being a
(c) Only SEBI

(d) SEBI for all types of Mutual Funds and additional permission from RBI in case of a Mutual Fund
subsidiary of a bank
being a

In index/stock futures trading, profits are received or losses are paid ______. [ 1 Mark ]
(a) in the delivery month
Q4
(b) on a weekly settlement basis

(c) on daily settlement
(d) on the day of expiry of the contract
Derivative includes:
A. a security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for
differences or any other form of security.
B. a contract which derives its value from the prices, or index or prices, of underlying securities. [ 2 Marks ]
Q5
(a) only A
(b) only B
(c) Both A and B
(d) Neither A nor B
The _________issued by SEBI aim to secure fuller disclosure of the relevant information about the issuer and the nature
of issue so that the investors can take informed decision [ 1 Mark ]
(a) SEBI (Stock Brokers and Sub brokers) Rules
Q6
(b) SC(R)A
(c) Disclosure and Investor Protection Guidelines
(d) SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets)
regulations

If the company pays dividend of Rs.10 every year and the expected return for the investor is 8%, what is the theoretical
value of the share of the company for a period of one year, if the par value of the share is Rs.80? [ 2 Marks ]
(a) 80
Q7
(b) 83.334
(c) 84.07
(d) 89.259
A trading member has the following position in a particular security TELCO:
Client Buy Quantity Sell Quantity
Q8
5200
1000
3000
500
2000
5600
4800
3400
What will be the final settlement obligation in TELCO for the member? [ 3 Marks ]
(a) Payin obligation for 13600 shares
(b) Payin obligation of 1700 shares
(c) Payin obligation for 800 shares
(d) Payout obligation of 1700 shares
The difference between primary markets and secondary markets is __________. [ 2 Marks ]
(a) Corporates raise resources directly from the investors through the primary market, whereas in
secondary markets, investors buy and sell securities to one another
Q9
the
(b) Primary markets deal in shares whereas secondary markets in debentures

(c) Primary markets are legal whereas secondary markets are not
(d) The initial public issues are made in primary market whereas all subsequent issues are made
secondary markets
in the

Which of the following is not a speculative transaction? [ 1 Mark ]
(a) a contract in respect of stocks and shares entered into by a dealer or investor therein to
loss in his holdings of stocks and shares through price fluctuations
Q10
guard against
(b) a contract entered into by a member of a forward market or a stock exchange in the course of
any
transaction in the nature of jobbing or arbitrage to guard against loss arising in
ordinary course of business
(c) a contract entered into by a person to guard against loss through future price fluctuations in
his contracts for actual delivery of goods manufactured by him or merchandise sold
by him
respect of
(d) none of the above is speculative transactions

Assume security A with a beta of 1.1 is being considered at a time when risk free rate of return is 5% and market return
is expected to be 14%. What is the required rate of return according to Capital Asset Pricing Model? [ 2 Marks ]
(a) 18.9
Q11
(b) 21.9
(c) 14.9
(d) 16.9
Which one of the following is NOT an immediate measure taken by NSCCL in case a member fails to meet any
obligation? [ 1 Mark ]
(a) Squares up open positions.
Q12
(b) Reduces exposure limits.

(c) Uses trade guarantee fund to discharge his obligations.
(d) Disables trading terminal until member's obligations are fully discharged.
Stock price of XYZ Ltd. is trading at Rs.60. The firm is expected to declare dividend of Rs.6 per share and is expected to
grow at rate of 12per cent per year. What is the cost of equity under dividend growth model? [ 2 Marks ]
(a) 22%
(b) 20%
Q13
(c) 18%
(d) 12%
S&P CNX Nifty includes _______most liquid stocks that trade on NSEIL. [ 1 Mark ]
(a) 50
Q14
(b) 30
(c) 500
(d) 100
Register of transactions (Sauda Book) shall be preserved for a period of ___ years by the stock broker as per the
Securities Contracts (Regulation) Rules, 1957. [ 2 Marks ]
(a) 7
Q15
(b) 5
(c) 6
(d) 10
An order which is activated when a price crosses a limit is _________ in F&O segment of NSEIL. [ 1 Mark ]
(a) Market order
Q16
(b) Fill or kill order

(c) Stop loss order
(d) None of the above
Auction is held in Reliance for 10,000 shares.
The closing price of Reliance on that day was Rs.146.00
The last traded price of Reliance on that day was Rs.141.00
The close price of Reliance last Friday was Rs.142.00
The previous day's close price of Reliance was Rs.151.00
What is the maximum allowable price at which the member can put a sell order in the auction for Reliance? (Price band
applicable for Auction market is +/15%) [ 3 Marks ]
Q17
(a) Rs. 167.90

(b) Rs. 173.65
(c) Rs. 162.15
(d) Rs. 163.30
What is the current yield if a 11.50% bond sells in the market for Rs.125? [ 2 Marks ]
(a) 9.2
Q18
(b) 9.15
(c) 9.25
(d) 9
On May 20, 2003, SATYAM COMP closed at Rs. 224, while the June futures contract on SATYAM COMP closed at Rs. 226.4.
On May 21, 2003, SATYAM COMP closed at Rs. 227 and the June futures contract on SATYAM COMP closed at Rs. 228.70.
Santosh is long 2 contracts of SATYAM COMP (minimum lot size per contract of SATYAM COMP is 1000). What is the profit
/ loss made by Santosh on his position on May 21, 2003? [ 3 Marks ]
Q19
(a) Loss of Rs. 4,600

(b) Profit of Rs. 6,000
(c) Profit of Rs. 4,600
(d) Loss of Rs. 6,000
Which of the following statements is incorrect regarding B2B portals? [ 2 Marks ]
(a) The 'debtonnetindia' is a B2B webenabled market place for primary issuance of debt
securities and
provides investors and brokers similar levels of efficiency and transparency
on the primary market segment.
Q20
(b) The B2B portal 'debtonnetindia', provides both secondary and primary market platform.
(c) TheB2B portal 'riskexpress' provides both secondary and primary market platform.
(d) Two B2B portals, namely 'debtonnetindia' and 'riskexpress' provide a secure, anonymous,
and flexible transactional platform for issue and trading of fixed income instruments.
neutral

What is the average rate of return if the returns during the previous three years are 10%, 25% and 42%? [ 1 Mark ]
(a) 21%
Q21
(b) 25.67%
(c) 2.57%
(d) 15.40%
In which market does Buyer & seller not know each other? [ 1 Mark ]
(a) Continuous Market
Q22
(b) Negotiated Market

(c) Continuous as well as negotiated
(d) None of the Above
Which of the following is not the main objective of SEBI? [ 2 Marks ]
(a) Protecting the interest of investors in securities market
Q23
(b) Regulating the securities market

(c) Promoting and developing Forex Market in India.
(d) Promoting the development of securities market
________ is also known as profitability index which measures the present value of the returns per rupee invested. [ 1
Mark ]
(a) Accounting Rate of Return
Q24
(b) Internal Rate of Return

(c) Net Present Value
(d) BenefitCost Ratio
Calculate the value 5 years hence of a deposit of Rs. 1,000 made today if the interest rate is 7% (compounded
annually). [ 2 Marks ]
(a) Rs.1,403
Q25
(b) Rs.1,350
(c) Rs.1,000
(d) Rs.1,035
The branch manager can view all the order details for _______ in the 'Outstanding Orders' screen in the NEAT system.
(A) a specific dealer under his own branch
(B) all dealers under his own branch
(C) the whole broking firm [ 1 Mark ]
Q26
(a) (A) and (B) only

(b) (A) and (C) only
(c) (A), (B) and (C)
(d) (B) and (C) only
Total Margin levied on a member in respect of options contracts comprises of _____. [ 1 Mark ]
(a) Initial Margin + Premium Margin Assignment Margin
Q27
(b) Initial Margin + Mark to Market Settlement

(c) Initial Margin + Premium Margin
(d) Initial Margin + Premium Margin + Assignment Margin
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? [ 2 Marks ]
(a) Security A
Q28
(b) Both securities are equally risky

(c) Security B
(d) Neither of the securities is risky
Which of the following is NOT true about corporate securities market reforms? [ 2 Marks ]
(a) Indian companies were allowed access to international capital market through issue of ADRs
Q29
(b) Major part of the liberalisation process was the repeal of the Capital Issues (Control) Act,
1992.
and GDRs.
1947 in May
(c) Permission to access the international capital market was withdrawn.

(d) To ensure effective regulation of the corporate securities market, the SEBI Act, 1992 was
empower SEBI with statutory powers.
enacted to

A stock currently sells at 120. The put options to sell the stock sells at Rs. 134 costs Rs. 18. What is the time value of the
option? [ 2 Marks ]
(a) Rs.12
Q30
(b) Rs.18
(c) Rs.4
(d) Rs.14
The authority regulating the issue of shares by companies in the primary markets is the ________. [ 1 Mark ]
(a) Reserve Bank of India
Q31
(b) National Stock Exchange

(c) Controller of Capital Issues
(d) Securities and Exchange Board of India
A trading member is getting a message that he has violated the gross exposure limit. The gross exposure at that point of
time was Rs. 1400 lakh. What is his base capital? (Assume Rs. 1400 lakh is allowable gross exposure). [ 2 Marks ]
(a) Rs. 155.00 lakh
Q32
(b) Rs. 181.00 lakh

(c) Rs. 157.00 lakh
(d) Rs. 46.00 lakh
What are securities issued at Discount & redeemed at par? [ 1 Mark ]
(a) Securities with Fixed Coupon rates
Q33
(b) Indexed Bonds

(c) ZeroCoupon Bonds
(d) Floating Rate Bonds
For what kind of results is Limited review mandatory? [ 2 Marks ]
(a) Audited halfyearly
Q34
(b) Audited quarterly

(c) unaudited quarterly
(d) unaudited halfyearly
An atthemoney option contract would generate ______upon exercise for the buyer. [ 1 Mark ]
(a) negative cash flow
Q35
(b) positive cash flow

(c) no cash flow
(d) specified amount of cash flow
The cost of debt capital is cheaper in the capital structure under________. [ 1 Mark ]
(a) Net Operating Income Approach
Q36
(b) Traditional Approach

(c) Net Income Approach
(d) Modigliani and Miller Approach
Where securities are listed on the application of any person on any recognised stock exchange, such person shall comply
with the conditions of the listing agreement with __________. [ 2 Marks ]
(a) that stock exchange
Q37
(b) Registrar of Companies

(c) Central Government
(d) Securities and Exchange Board of India
Average Collection Period is given by __________. [ 1 Mark ]
(a) Average Accounts Payables/Average Daily Credit Sales
Q38
(b) Average Accounts Payables/Average Daily Credit Purchases

(c) Average Accounts Receivables/Average Daily Credit Sales
(d) Average Accounts Receivables/Average Daily Credit Purchases
The preissue and postissue obligations are discharged by _______. [ 1 Mark ]
(a) bankers
Q39
(b) stock exchanges

(c) transfer agents
(d) merchant bankers
Find the spot rate uptill next coupon, using NelsonSeigel Model when settlement date is 15th March 2003 & next
coupon is 23rd September 2003, Beta 0=8, Beta 1 = 1.85, Beta 2 = 4 and Tau=15. [ 3 Marks ]
(a) 5.9089
Q40
(b) 6.0576
(c) 6.1135
(d) 6.0045
What is the present value of Rs. 4000 receivable after two years at a discount rate of 5% under continuous discounting? [
2 Marks ]
(a) Rs. 3619.34
Q41
(b) Rs. 3800

(c) Rs. 3628.11
(d) Rs. 4200
Find the forward leg consideration for Security 11.50% 2012 for Settlement date of 25th August 2003 & Maturity date of
14th December 2012 with Market Price of Rs. 133 (ExInterest Price), Repo rate 8% p.a. & Repo term of 5 days. [ 3
Marks ]
Q42
(a) 135.6565
(b) 135.6246
(c) 135.4163
(d) 135.5812
Payin and payout of funds and securities are effected on the same day in the ____________. [ 1 Mark ]
(a) ALBM Segment
Q43
(b) Rolling Market Segment

(c) Normal Market segment
(d) Limited Physical Segment

Trading member Mr. Shantilal took proprietary purchase in a March 2000 contract. He bought 1500 units @Rs.1200 and
sold 1200 @ Rs. 1220. The end of day settlement price was Rs. 1221. What is the outstanding position on which initial
margin will be calculated? [ 2 Marks ]
Q44
(a) 1200 units

(b) 2700 units
(c) 1500 units
(d) 300 units
Which of the following is FALSE about the NEAT system? [ 2 Marks ]
(a) A member punches into the computer quantities of securities and the price at which he wants
transact.
Q45
(b) The transaction is executed through the mainframe computer of the exchange as soon as the
punched by the user finds a matching sale or buy order from a counter party.
to
order
(c) The identity of the trading member is revealed to make the system transparent.
(d) This system enables members from across the country to trade simultaneously with enormous
efficiency.
ease and

A call option that is outofthemoney or atthemoney has ________. [ 1 Mark ]
(a) no value
Q46
(b) only intrinsic value

(c) face value
(d) only time value
Which of the following is a criterion for admission of a stock into S&P CNX Nifty? [ 1 Mark ]
(a) Stocks where prices have gone up recently
Q47
(b) Stocks where ICICI has appraised projects

(c) Stocks with low impact cost
(d) Stock with low P/E
NSE has set up Investor Protection Fund as a ________. [ 1 Mark ]
(a) Company
Q48
(b) Cooperative Society

(c) Association
(d) Trust
The power to withdraw recognition to a Stock Exchange vests in ______. [ 1 Mark ]
(a) Parliament
Q49
(b) Reserve Bank of India

(c) Securities and Exchange Board of India
(d) Department of Company Affairs
How much is the correlation coefficient between the companies A and B, if their covariance is 30 and their standard
deviations respectively are 6 and 8? [ 2 Marks ]
(a) 0.46
Q50
(b) 0.625
(c) 1.6
(d) 1
Mr. Harsh purchased 16000 shares of MTNL Options having strike price of 120. The market lot of the shares before
adjustment was 1600. After the corporate action of 1:1 bonus in MTNL, the revised details in respect of strike price,
Market lot and positions would be _________. [ 2 Marks ]
(a) 120, 1600, 16000
Q51
(b) 240, 800, 8000

(c) 30, 1600, 8000
(d) 60, 3200, 32000
Spot value of Nifty is 1240. An investor buys a onemonth nifty 1255 put option for a premium of Rs.17. The option is
__________. [ 2 Marks ]
(a) atthemoney
Q52
(b) outofthemoney
(c) inthemoney
(d) abovethemoney
For a security B, if price at the beginning of the year is Rs.20; dividend receivable at the end of the year is Rs.0.5; and
the price at the end of the year is Rs.22 then what is the rate of return on the security? [ 2 Marks ]
(a) 0.095
Q53
(b) 0.125
(c) 0.045
(d) 0.135
Which of the following is NOT true about corporate securities market reforms? [ 2 Marks ]
(a) The trading cycle in the stock exchanges follow rolling settlement.
Q54
(b) The practice of allocation of resources among different competing entities as well as its terms
central authority was discontinued.
by a
(c) The secondary market overcame the geographical barriers by moving to screen based trading.
(d) Counterparty risk is borne by investors.
The depositories assist NSCCL to payin and payout of _________. [ 1 Mark ]
(a) securities held in demat form only
Q55
(b) securities held in physical form only

(c) securities held in demat as well as in physical form
(d) None of the above
Mr. A purchased equity shares of XYZ Ltd. at a cost of Rs. 95000/ on 1st June 2001. He sold the same on 1st January
2003 for Rs. 98000/. (Given: Cost inflation index FY 200102 = 426, FY 200203 = 447 and 447/426 = 1.05). Long term
capital profit / loss on this transaction would be ____. [ 2 Marks ]
Q56
(a) Long term capital gain Rs. 3,000/

(b) Long term capital loss Rs. 1,750/
(c) Long term capital gain Rs. 1,750/
(d) Long term capital loss Rs. 3,000/
Which of the following is TRUE about primary markets? [ 2 Marks ]
(a) Primary markets are places where only short term instruments are traded.
Q57
(b) Primary markets refer to the direct solicitation of funds from the public by companies.
(c) Primary markets are markets where commodities are sold.
(d) Primary markets is the place where public can buy and sell securities with one another.
Premium Margin is levied at ___ level. [ 1 Mark ]
(a) broker
Q58
(b) trading member

(c) client
(d) clearing member
In the case of a GTC order, each day counted is a calendar day inclusive of ____________. [ 1 Mark ]
(a) Saturdays and Sundays

Q59
(b) Saturdays, Sundays and other Exchange specified holidays

(c) Sundays only
(d) Saturdays only
Which of the following is NOT true about a credit rating agency (CRA)? [ 2 Marks ]
(a) CRA can not rate the securities issued by its promoter
Q60
(b) CRA can be promoted by any company or body corporate having the networth of Rs. 100 crore
previous 3 years.
in
(c) CRA can not rate securities issued by any borrower, subsidiary, an associate promoter of CRA
if
there are common Chairman, Directors or employee between CRA or its rating committee and
these
entities.
(d) CRA has to have a minimum networth of 5 crore
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NCFM Model Test Paper

SECURITIES MARKET (BASIC) MODULE

Maximum Marks: 100

Test Duration: 105 minutes

Time Left: 69:48 minutes

(b) 1250 units

(b) short delivery

(c) Only SEBI

(e) I am not attempting this question

(b) on a weekly settlement basis

(e) I am not attempting this question

Client Buy Quantity Sell Quantity

(b) Primary markets deal in shares whereas secondary markets in debentures

(e) I am not attempting this question

(d) none of the above is speculative transactions

(b) Reduces exposure limits.

(b) Fill or kill order

(a) Rs. 167.90

(a) Loss of Rs. 4,600

(e) I am not attempting this question

(b) Negotiated Market

(b) Regulating the securities market

(b) Internal Rate of Return

(a) (A) and (B) only

(b) Initial Margin + Mark to Market Settlement

(b) Both securities are equally risky

(c) Permission to access the international capital market was withdrawn.

(e) I am not attempting this question

(b) National Stock Exchange

(b) Rs. 181.00 lakh

(b) Indexed Bonds

(b) Audited quarterly

(b) positive cash flow

(b) Traditional Approach

(b) Registrar of Companies

(b) Average Accounts Payables/Average Daily Credit Purchases

(b) stock exchanges

(b) Rs. 3800

(b) Rolling Market Segment

(e) I am not attempting this question

(a) 1200 units

(e) I am not attempting this question

(b) only intrinsic value

(b) Stocks where ICICI has appraised projects

(b) Cooperative Society

(b) Reserve Bank of India

(b) 240, 800, 8000

(b) securities held in physical form only

(a) Long term capital gain Rs. 3,000/

(b) trading member

(a) Saturdays and Sundays

(b) Saturdays, Sundays and other Exchange specified holidays

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