Equity Stock Market

Mid Term Assessment

Due date: 2023-10-28, 23:59 IST.
Your last recorded submission was on 2023-10-28, 11:25 IST
1 point
Q1. In 'Product Markets'________

Cost is not a reality

Price is entirely determined by the company
Goods and Services can be traded
Capital can be raised

1 point
Q2. Both the price of equity stocks and the price of bonds follow the principle
of _____________________.
Term Structure of interest rate
Fisher equation
Time Volume of Money
Forward rate

1 point
Q3. Equity stockholders have ____________ rights manifested as dividends proportional to
their stockholding in that firm.

Control
Coupon
Cash Flow
Liability

1 point
Q4. ________________ is able to capture the uptrend/downtrend in stock prices far more
effectively than the other types of averages.

Simple Average
Simple Moving Average
Linear Weighted Moving Average
Exponential Moving Average

1 point
Q5. Which among the below statements is not true about Dow Theory?
 Dow Theory uses intra-day price movements in the index to build a graph that shows the
trends in prices and indices.
Financial markets are an accurate indicator of business conditions in an economy
Dow Jones industrial index is a precursor to Technical Analysis
Dow Theory suggests that all relevant information is reflected in the price of equity
stocks and equity indices

1 point
Q6 .___________ is a portfolio of equity stocks that represents the characteristics of the
entire population of stocks traded in that exchange.

Optimum Equity Stock Portfolio

Equity Stock Market Index
Consumer Price Index
Index futures

1 point
Q7. The Beta of the Equity Stock Market Index is always _______

equal to 'zero'
lower than the beta of individual stocks
equal to ‘one’
higher than the beta of individual stocks

2 points
Q8. Maturities for instruments traded in long term markets vary from ________ to ________.

one year – five years

one year – twenty years
one year - ten years
one year – perpetuity

2 points
Q9. A Stock Market Index comprises a statistically significant sample of equity stocks
that represent that _________ and the ____________ characteristic of the entire population of
equity stocks traded in that market.

firm …. volume movements

price movements …. market
firm ….. price movements
market …. price movements

2 points
Q10. Discount rate in the case of bonds is the ______________, whereas, in the case of
equity stock, it is the _________________ by the equity stockholders.

cost of equity capital …. yield to maturity

coupon rate … interest rate
interest rate …. coupon rate
yield to maturity …. returns expected
2 points
Q11. In a Simple Moving Average, on the following day _____ is dropped off and __________
is added and the computation is repeated.

stock price of latest day… stock price of oldest day

average stock price… stock price of latest day
stock price of oldest day… stock price of latest day
weighted average price…simple average price

2 points
Q12. In a Bar Chart, If the ________________for the day is _________than the closing price for
the previous day, the line is shaded black.

opening price.....lower
closing price.....lower
closing price.....higher
opening price.....higher

2 points
Q13. _____________ the proportion invested in the market portfolio vis-à-vis the risk-free
assets __________ will be the risk of that portfolio.

Higher ..... lower

Lower ..... lower
Lower ..... greater
Higher …. equal to

2 points
Q14. Variance is a measure of change in the ___________ of an equity stock from its
_____________ over a given period of time.

price ..... median

risk ..... volumes
traded volumes ..... mean (average price)
price ..... mean (average price)

3 points
Q15. Firm ABC has earnings before interest and tax of CCU 1500 million, corporate tax
rate of 30%, and total long-term capital of 10,000 million currency units comprising: CCU
7,000 million of equity capital and CCU 3,000 million of debt (at an interest rate of 10%
per annum). Say, 40% of the firm’s debt is replaced by preference shares (on which
dividend is payable @ 9% per annum). With that change, the revised capital structure of
the firm will be:

Equity capital: CCU 4,200 million ; debt: CCU 3,000 million; preference capital:
CCU 2,800 million

Equity capital: CCU 5,000 million; debt: CCU 1,000 million; preference capital: CCU 4,000
million
 Equity capital: CCU 7,000 million; debt: CCU 1,800 million ; preference capital: CCU
1,200 million
Equity capital: CCU 7,000 million; debt: CCU 2,000 million ; preference capital: CCU
1,000 million

3 points
Q16. The ratio arrived at by dividing a Fibonacci number by another Fibonacci number
that is found two places to the right in the sequence is_________.

0.382
0.618
0.764
0.236

3 points
Q17. Based on the data given in the table below:

Weight in the Portfolio Standard Deviation

Risk Free Asset 50.00% 0
Market Portfolio 50.00% 28.0
What would be the Variance of the Portfolio?

200
196
185
170

End-term Assessment
Due date: 2023-10-28, 23:59 IST.

Your last recorded submission was on 2023-10-28, 11:56 IST

1 point

Derivative instruments in the equity stock market are used by _____________ to profit from
swings and volatilities in equity stock prices over time.

Hedgers

Buyers

Speculators

Sellers

1 point
Systematic risk is applicable to ______________.

specific equity stocks

hedgers

equity stocks of all firms listed in that market

systematic firms

1 point

Idiosyncratic risk is applicable to ______________.

specific equity stocks

hedgers

equity stocks of all firms listed in that market

systematic firms

1 point

A ___________ involves buying a call option and a put option, both with identical strike price
and maturity dates.

Butterfly spread

Straddle

Bullish Call spread

Strangle

1 point

Any buyer/seller in an exchange-traded transaction will be required to provide certain

percentage of the transaction value as _________.

Debt

Deposit

Margin
 Profit

1 point

For the purpose of margin calculation, the universe of shares is divided into _______
groups.

Two

Three

Four

Five

1 point

VC firms floats several ____________‘venture capital funds’.

Short-term

Close-ended

Open-ended

Long-term

2 points

Which of the following cater to financial requirement of companies that are mature and
offer assured returns?

Central Government

Financial Institutions

Financial Venture Capital Firms

Angle Investors

2 points

Value at Risk (VAR) is a ___________ method to assess the level of risk associated with any
____________ asset over a specified time frame.
 qualitative ….. real

qualitative …. financial

statistical …. real

statistical…. financial

2 points

Select the INCORRECT statement from the following:

A private equity market is one where the equity shares of firms are not quoted publicly
on the stock exchanges.

A private equity market is one where the equity shares of firms are quoted publicly on
the stock exchanges.

A private equity market is one where the equity shares of firms are held privately by
large institutions and high net worth investors.

A private equity market is one where the equity shares of firms are held publicly by
large institutions and high net worth investors.

2 points

Firms raise funds through private equity because:

They are able to raise funds in the bond market or in the public equity market or through
a bank loan.

They are not able to cope with high cost of financing associated with issue of bonds and
public equity.

They wish to fund mergers and acquisitions which they wish to keep confidential.

They wish to fund huge organizations which are doing financially well.

2 points

Which of the following methods uses hypothetical historic data for computing VAR?

Historical Simulation

Parametric Data
 Nelson-Siegel Model

Monte Carlo Simulation

2 points

Contributors to ‘Systematic Risk’ include:

Decline in revenues/profits

Inflation

Product obsolesces

High financing cost

2 points

Information about a multi options position is given below:

Current Spot Price 510

Call Put

Premium 20 15

Strike Price 540 490

Identify the options trading strategy that the investor has entered into.

Butterfly spread

Strangle

Straddle

Bullish Call Spread

3 points

A has an investment of 10,000 CCU in a portfolio that is 13.5% more risky than the market
Index. If A wants to hedge its investment using Index futures, what is the total value to be
hedged?
 8,650 CCU

11,350 CCU

10,000 CCU

9800 CCU

3 points

Based on the information below:

Group Group I

Value of trade 6 Million CCU

Volatility of the share 2.75%

Volatility of the index 4.00%

Calculate the VaR margin.

0.45 Million CCU

5.8 Million CCU

4.5 Million CCU

0.58 Million CCU

3 points

Data for the last two years interest rate for a 15 day (fortnight) deposit is:

(a) Mean value of 6%

(b) Standard deviation of 0.60%

(c) 26 fortnights in a year

Estimate the likely interest rate range (maximum and minimum) for a 15 day deposit
commencing the coming fortnight at 95% (two sigma) confidence level

6.432 - 6.292
6.235 - 5.765

6.142 - 5.553

6.335 – 5.965