Section A (1 Mark)
__________refers to responding to a positive action with another positive action, rewarding kind actions.
Section B (2 Mark)
R acquired shares of G Ltd, on 15/12/1998 for Rs. 5 lakh which were sold on 15/5/2011 for Rs. 18.50 lakh. Expenses of transfer were Rs. 20,000/-. He invests Rs. 6 lakh in the bonds of NHAI on 16/10/2011. Compute the capital gain for the assessment year 2012-13.
Section B (2 Mark)
An appraiser estimates that a property will produce NOI of Rs 25,000, the Yo is 11 percent, and the growth rate is 2.0 percent. What is the total property value (unrounded)?
Section C (4 Mark)
A rate of interest of 10% semi-annual compounded quarterly would be equal to -------------------- % per annum compounded annually.
Section C (4 Mark)
You purchased a call option for Rs3.45 seventeen days ago. The call has a strike price of Rs45 and the stock is now trading for Rs51. If you exercise the call today, what will be your holding period return? If you do not exercise the call today and it expires, what will be your holding period return?
Section B (2 Mark)
Ms. Shalini Bhargav plans to purchase a property having a projected annual income for three year is Rs 20,000 with 12 percent expected return and expect to sell it at the end of three years for Rs 2,70,000. Compute the present value of the property.
Section A (1 Mark)
A testamentary trust is affected after the
Section A (1 Mark)
The __________the suggested deviation from the rational portfolio asset allocation, the _________ the need to mitigate the investor’s behavioral biases
Section A (1 Mark)
Which of the following might be used as a factor in an APT factor model?
Section B (2 Mark)
In US which form tells your employer all they need to know about your tax-related allowance information?
Section B (2 Mark)
Which of the following statements is / are correct?
Section C (4 Mark)
Read the senario and answer to the question.
Sajan and Jennifer want to arrange for the funds to meet marriage expenses of their children. They plan the wedding of Mark after 23 years from now and that of Stephanie after 25 years from now. To accumulate the funds for marriage, you advise to start a monthly Systematic investment Plan (SIP) immediately in Equity scheme of a mutual fund. Such SIP will continue for the next 15 years. You further advise to hold the investment in equity shares till Stephanie’s marriage to meet the wedding expenses. After meeting the expenses of Marks’ marriage, the balance fund in the quity scheme are allowed to appreciate to meet the differential expenses of Stephanie’s marriage. The amount of SIP comes to __________.
Section A (1 Mark)
A 15 year annuity due has a future value of Rs. 15,00,000/- If ROI is 9 % per annum, then how much will be each annuity amount ?
Section A (1 Mark)
For a “single income family” priority is on
Section B (2 Mark)
When the income of an individual includes Rs. 20000 as the income of his minor child in terms of section 64(1A), taxable income in this respect will be:
Section A (1 Mark)
With the______________, the buyer gets no protection from encumbrances. This deed type has very specialized uses.
Section A (1 Mark)
When two banks simply agree to exchange a portion of their customers' loan repayments, they are using:
Section A (1 Mark)
Which of the following measures is lowest for a currently callable bond?
Section B (2 Mark)
Akash has only compulsory third party policy for his car. He jumped a red light and collided with another car and then with the boundary wall of a nearby house. Damage to his car was of Rs. 17,000/-, damage to other car was of Rs. 15,000/- and damage to the boundary wall of house was of Rs. 15,000. The insurance policy of Akash will pay:
Section B (2 Mark)
Mr. X gives Rs. 200000 to Mrs. X as gift. She invests in a proprietary concern and incurs a loss of Rs. 40000.
Section B (2 Mark)
Conventional theories presume that investors ____________ and behavioral finance presumes that they ____________.
Section A (1 Mark)
One of the tax exemption under avoidance of Double Taxation is U/S Sec 10(6)(ii) for exemption on income received by the diplomats, ambassador, etc
Section C (4 Mark)
Mr. Raman Gehlot, aged 55 years, is owner of midsized business firm. His family consists of his wife Anupama, aged 55, son Nishant aged 29 and daughter Nivedita aged 27. His wife is a housewife and social worker. Both of their children are happily married and well settled. The couple anticipates their life expectancy to be 75 years each.
The gross annual income of Raman for the previous year 2010–11 is expected to be Rs. 9,60,000. The couples’ household expenses are estimated to be Rs. 4,90,000 p.a. Taking into account incidental expenses of another Rs. 85,000 the net expenses of the family are estimated to be Rs. 5,75,000 for the previous year 2010–11. Thus they achieved a net surplus of Rs. 3,85,000 during the year. Raman has a net saving of Rs. 12,00,000 which he would like to invest for his post retirement purposes at the beginning of the year.
Currently Raman has approximately 5 years left for retirement and thus he is not very aggressive in his investments. The returns of his portfolio based on asset allocation during the accumulation and distribution phase are calculated as below:
Section A (1 Mark)
Which one of the following has not caused the huge growth in hedge funds and private equity?
Section A (1 Mark)
The premium on all other riders put together should not exceed _____ of the premium on the base policy
Section C (4 Mark)
Which of the following statements is/are correct?
Section A (1 Mark)
The eligibility Criteria for Self Employed Professionals & Businessman for minimum annual income of the applicant in case of personal loan is:
Section B (2 Mark)
Calculate the beta on a portfolio from the following data:
Section C (4 Mark)
The expected return for the market is 12 percent, with a standard deviation of 20 percent. The expected risk-free rate is 8 percent. Information is available for three mutual funds, all assumed to be efficient, as follows:
Calculate the expected return on each of these portfolios respectively.
Section B (2 Mark)
As Per Article 12 Double Taxation Avoidance Agreement with US, _____per cent of the gross amount of the royalties or fees for included services as defined in this Article, where the payer of the royalties or fees is the Government of that Contracting State, a political sub-division or a public sector company.
Section B (2 Mark)
Narayan expects to receive Rs 25000 in net receipts each year for five year and to sell the property for Rs 350,000 at the end of the five-year period, if Narayan expects a 15% return, what would be the value of the property?
Section C (4 Mark)
Data on following mutual funds given below:
Risk free return is 8%. Calculate Treynor measure.
Section B (2 Mark)
The two aspects of Regret bias are_____________ and _____________.
Section A (1 Mark)
A bank is considering making a loan to Sandeep Hunjan. Sandeep owns his own home and has lived there for the past four years. What aspect of evaluating a consumer loan application is this fact most concerned with?
Section C (4 Mark)
Puspinder Singh Ahluwalia took a housing loan on 1st. of June 2009 (EMI in arrear) of Rs. 50 lacs at a ROI of 10.75% p.a. compounded monthly for 12 years. He wants to know the deduction in taxable income he can claim u/s 24 of the IT act for the FY 2011 -12
Section C (4 Mark)
Suppose Nifty is at 4500 in May. An investor, Mr. A, executes a Short Strangle by selling a Rs. 4300 Nifty Put for a premium of Rs. 23 and a Rs. 4700 Nifty Call for Rs 43.
What would be the Net Payoff of the Strategy?
• If Nifty closes at 3735
• If Nifty closes at 5265
Section A (1 Mark)
All of the following are examples of excise taxes except:
Section B (2 Mark)
Rule of 72 is used for
Section C (4 Mark)
The expected return and standard deviations of stock A & B are:
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?
Section A (1 Mark)
Which of the following statements about the difference between the SML and the CML is/are TRUE?
Section B (2 Mark)
Profitability Index is
Section A (1 Mark)
The tendency, after an event has occured, to think that we knew what was going to happen beforehand. We overestimate the likeliness that we would have been able to predict the outcome of a past series of events. Which of the following is most likely consistent with this bias?
Section A (1 Mark)
Which of the following is NOT one of the phases of the life-cycle theory of asset allocation?
Section C (4 Mark)
KB, a household product manufacturer, reported earnings per share of Rs3.20 in 1993, and paid dividends per share of Rs1.70 in that year. The firm reported depreciation of Rs315 million in 1993, and capital expenditures of Rs475 million. (There were 160 million shares outstanding, trading at Rs51 per share.) This ratio of capital expenditures to depreciation is expected to be maintained in the long term. The working capital needs are negligible. KB had debt outstanding of Rs1.6 billion, and intends to maintain its current financing mix (of debt and equity) to finance future investment needs. The firm is in steady state and earnings are expected to grow 7% a year. The stock had a beta of 1.05. (The Risk Free Rate is 6.25%.)
Estimate the value per share, using the FCFE Model.
Section C (4 Mark)
Nifty is at 3200. Mr. XYZ expects very little movement in Nifty. He sells 2 ATM Nifty Call Options with a strike price of Rs. 3200 at a premium of Rs. 97.90 each, buys 1 ITM Nifty Call Option with a strike price of Rs. 3100 at a premium of Rs. 141.55 and buys 1 OTM Nifty Call Option with a strike price of Rs. 3300 at a premium of Rs. 64.
What would be the Net Payoff of the Strategy?
• If Nifty closes at 3200
• If Nifty closes at 4212
Section A (1 Mark)
Which one of the following statements is/are true?
Section A (1 Mark)
The potential loss for a writer of a naked call option on a stock is
Section B (2 Mark)
X Ltd. has given a dividend of Rs. 3 per share last year. The company is growing at a constant rate of 5 % every year and the investor’s required rate at this share is 12 % per annum. Find out the Intrinsic value of this share.
Section C (4 Mark)
Personal Data
Financial Data
Shanker and Parvati Pandey have the following assets at fair market value (FMV):
Their simplified income statement is presented as follows:
They have no liabilities and no company-sponsored retirement plans.
They have no wills and they live in a non-community property state.
Shankers’ parents can meet all current expenses from current cash flow but have very limited reserve funds
Other Relevant Data
●They are inexperienced investors, but they are willing to take reasonable and normal investment risk if appropriate, but they do not wish to invest aggressively.
●Both Shanker and Parvati have purchased term life insurance policies with Rs. 250,000 death benefit on each; they own their own policies, and Ganesh is the contingent beneficiary on both policies.
●Shanker is the primary beneficiary of Parvati’s single premium deferred annuity; Ganesh is the contingent beneficiary.
●You have found their disability insurance inadequate. The Pandey have indicated they could fit your proposed Rs. 3500 annual premium for an adequate policy into their living expenses.
●You have reviewed their auto, homeowner’s, liability, and life insurance and found their policies adequate. Shanker and Parvati are responsible for their medical expenses.
●Ganesh is an intelligent high school student who earns scholarship of Rs. 2,000 annually and has a Rs. 500 in savings account.
●The “cash” is invested in a variety of money market funds and insured savings accounts.
●They do not plan additional children and they have no other dependents.
●The Pandey currently can save Rs. 5,000 per year out of current salary and can continue to do so (in inflation-adjusted Rupees) until they retire in 20 years. This savings rate assumes that all planned asset acquisition and replacements are paid out of income before savings (except the three goals as per below.
Goals (in order of priority)
1.College education for Ganesh. They expect to spend a total of Rs. 5,00,000 (Present value) for his entire education.
2.Retirement in 20 years which maximizes their standard of living at retirement.
3.Parvati and Shanker plan to take 6 months off from work (“sabbatical”) in 4 years for travel and research and to spend Rs. 1,50,000.
Economic Environment
The economy has been in a period of modest economic growth for about 2 years. Inflation, as measured by the CPI, was at a 4.9% annual rate over the last year. Ninety-day T-bill rates are currently 6%, while the yield to maturity on 20-year government bonds is 7.5%. Most forecasts call for little change in these conditions over the short and long term.
Assumptions provided by Wealth Manager
Section A (1 Mark)
When the sponsored entities creates CMOs they often use different _____________ which each promise a different coupon rate and which have different maturity and risk characteristics.
Section B (2 Mark)
The risk-free return is 9 percent and the expected return on a market portfolio is 12 percent. If the required return on a stock is 14 percent, what is its beta?
Section A (1 Mark)
In order to remain competitive, non-core providers need to achieve the following:
Section A (1 Mark)
The use of P/E ratios to select stocks suggests that
Section A (1 Mark)
A(n) _________________________ occurs when two banks agree to exchange a portion or all of the loan repayments of their customers.
Section B (2 Mark)
Withholding Tax Rates for payments made to Non-Residents are determined by the Finance Act passed by the Parliament for various years. The current rates for Interest are:
Section A (1 Mark)
A ____________________ tax system takes the same percentage of each person's income, regardless of whether the income is high, medium, or low.
Section A (1 Mark)
Quicker attention and resolution of complaints lead to ________
Section A (1 Mark)
____________means that people resist inequitable outcomes; i.e., they are willing to give up some material payoff to move in the direction of more equitable outcomes.
Section A (1 Mark)
Mr. X’s minor daughter earned Rs. 50000 from his special talent. This income will be clubbed with
Section A (1 Mark)
HNWI stands for
Section B (2 Mark)
The favorable difference received by buyer/holder on the exercise/expiry date, between the final settlement price as and the strike price, will be recognized as ___________
Section A (1 Mark)
As per presumptive income scheme under section 44AE, the presumed income shall be:
Section A (1 Mark)
The Eligibility Criteria for Personal Loans for Self Employed Professionals & Businessman in India states that the minimum age of the applicant should be:
Section C (4 Mark)
Read the senario and answer to the question.
Calculate income from House property for Mr. Keshav for assessment year 2010-11.
Section B (2 Mark)
Reliance Ltd. has issued a preferred stock that pays Rs.10 per share. The dividend is fixed and the stock has no expiration date. What is the intrinsic value of Reliance Ltd. stock, assuming a discount rate of 14%?
Section C (4 Mark)
Suppose ABC Ltd. is trading at Rs. 4457 in June. An investor Mr. A buys a Rs 4500 call for Rs. 100 while shorting the stock at Rs. 4457. The net credit to the investor is Rs. 4357
What would be the Net Payoff of the Strategy?
• If ABC Ltd closes at 4145
• If ABC Ltd closes at 4983
Section A (1 Mark)
Teena Dutta wants to buy a used car and wants a loan that she will pay off over the next three years with monthly payments. What type of loan does Teena want?
Section A (1 Mark)
When markets are in equilibrium, the CML will be upward sloping
Section C (4 Mark)
OMG Petro Ltd produces and markets crude oil. The following are selected numbers from the financial statements for 1992 and 1993 (in millions).
The firm had capital expenditures of Rs950 million in 1992 and Rs1 billion in 1993. The working capital in 1991 was Rs190 million, and the total debt outstanding in 1991 was Rs5.75 billion. There were 305 million shares outstanding, trading at Rs21 per share.
Estimate the cash flows to equity in 1992 and 1993(in Rs Millions)
Section B (2 Mark)
Calculate Gross Annual Value where Gross Municipal Value is Rs.120, Fair Rent is Rs.105. Actual rent receivable is Rs.100& Standard Rent is Rs.125
Section A (1 Mark)
Adjusted gross income is used in establishing limits on the following deductions, with the exception of
Section C (4 Mark)
Assume the following;
With this agreement, every 6 months, the transfer of funds takes place between fixed rate payer and floating rate payer.
What would Net Cash flows after 6-months from the initiation date?
Section C (4 Mark)
An investor purchased on margin Alpha Computer for Rs. 30/- a share. The stock's price subsequently rose to Rs. 50/- a share at which time the investor sold the stock. If the margin requirement is 60 percent and the interest rate on borrowed funds was 7 percent, what would be the percentage earned on the investor's funds (excluding commissions)? What would have been the return if the investor had not bought the stock on margin?
Section A (1 Mark)
Amit has monthly net income of Rs10500. He has a house payment of Rs 4500 per month, a car loan with payments of Rs 2500 per month, a Visa card with payments of Rs 500 per month, and a credit card with a local department store with payments of Rs 1000 per month.
What is Amit's debt payments-to-income ratio?
Section A (1 Mark)
An appealing feature of options on futures contracts is that:
Section A (1 Mark)
Which of the following statement is correct?
Section A (1 Mark)
The two major types of real estate are ____ and ___ .
Section C (4 Mark)
Mr. XYZ sells a Nifty Put option with a strike price of Rs. 4000 at a premium of Rs. 21.45 and buys a further OTM Nifty Put option with a strike price Rs. 3800 at a premium of Rs. 3.00 when the current Nifty is at 4191.10, with both options expiring on 31st July.
What would be the Net Payoff of the Strategy?
• If Nifty closes at 3980.55
• If Nifty closes at 4800
Section A (1 Mark)
Retiring early will need
Section A (1 Mark)
A firm in an industry that is very sensitive to the business cycle will likely have a stock beta ___________.
Section B (2 Mark)
A bank has a long term relationship with a particular business customer. However, recently the bank has become concerned because of a potential deterioration in the customer's income. In addition, regulators have expressed concerns about the bank's capital position. The business customer has asked for a renewal of its Rs25 million dollar loan with the bank. Which credit derivative can help this situation?
Section B (2 Mark)
Rakesh owes Rs. 10000 to Haresh who transfers the debt amount to Chirag. Haresh then demands the same from Rakesh, who does not have a notice of the transfer as per section 131 but still pays to Haresh. This payment is invalid &Chirag can sue Rakesh for the debt
Section B (2 Mark)
Which of the following statement is/are correct?
Section C (4 Mark)
Suppose Nifty is at 4450 on 27th April. An investor, Mr. A, enters into a short straddle by selling a May Rs 4500 Nifty Put for Rs. 85 and a May Rs. 4500 Nifty Call for Rs. 122.
What would be the Net Payoff of the Strategy?
• If Nifty closes at 4293
• If Nifty closes at 5158
Section B (2 Mark)
Under the Payment of Gratuity Act, 1972, where the employee employed in a seasonal establishment is deemed to be in continuous service for such period if he actually worked for not less than __________% of the number of days on which the such establishment was in operation during such period.
Section A (1 Mark)
You buy a investment plan by investing Rs. 5000/- per month for first 12years what is the maximum amount you can withdraw from this account for 12 years every month if you want to have Rs. 500000 at the end of 24 years .The rate of interest is 15% per annum compounded monthly.
Section A (1 Mark)
Which of the following is a market anomaly?
Section A (1 Mark)
A type of investor who is willing to risk his own capital and give up security to gain wealth is known as:
Section A (1 Mark)
_____________allow investors to increase diversification in direct real estate holdings by investing in groups of real estate projects.
Section C (4 Mark)
Read the senario and answer to the question.
Which of the following would affect Net Worth of Keshav?
Section B (2 Mark)
Mr. Rai has received a house under a will on death of his uncle in the financial year 1985-86. His uncle purchased the house on 1-4-1968 for Rs.7 lakh. Mr. Rai has sold this during the financial year 2011-12 for Rs.62 lakh. Calculate the taxable amount of capital gain if the fair market value of house as on 1-4-1981 is Rs.20,00,000/- CII-12-13: 852,11-12: 785,10-11:711]
Section C (4 Mark)
Medicon is one the world's largest manufacturer of implantable biomedical devices, reported earnings per share in 1993 of Rs3.95, and paid dividends per share of Rs0.68. Its earnings are expected to grow 16% from 1994 to 1998, but the growth rate is expected to decline each year after that to a stable growth rate of 6% in 2003. The payout ratio is expected to remain unchanged from 1994 to 1998, after which it will increase each year to reach 60% in steady state. The stock is expected to have a beta of 1.25 from 1994 to 1998, after which the beta will decline each year to reach 1.00 by the time the firm becomes stable. (The Risk Free rate is 6.25%.)
Estimate the value per share, using the three-stage dividend discount model.
Section A (1 Mark)
You buy a investment plan by investing Rs. 5000/- per month for first 12years and Rs. 10000/- per month for next 12 years. If the rate of interest is 15% per annum compounded monthly . How much amount would you have after 24 years?
Section B (2 Mark)
To pay for new equipment with a cash price of Rs7500, you need to borrow at 5.3% compounded monthly, then make monthly payments for 32 months. How many fewer months would it take to pay back the loan if you had also saved Rs600 to pay at the end?
Section B (2 Mark)
Under the Workmen Compensation Policy, when the employment injury results in death, the insurance company pays 40 % of the monthly wages of the deceased multiplied by the relevant factor or Rs. _________ whichever is more.
Section B (2 Mark)
Regular collateralized debt obligations (CDO) have been surpassed by:
Section A (1 Mark)
How many sections are there in Householder’s Insurance Policy?
Section A (1 Mark)
The minimum annual income for availing Auto Loan is:
Section C (4 Mark)
Paridhi has an investment portfolio of Rs.2,00,000; the initial portfolio mix is Rs.1,00,000 in stocks, Rs.60000 bonds and Rs.40000 in bank.
If market goes up by 10% and the value of bonds decreases by 10%, what should Paridhi do under the constant mix policy?
Section A (1 Mark)
Technical Analysis of security valuation includes ………..
Section A (1 Mark)
_______________ is defined as the total amount of taxes paid as a percentage of a person's income.
Section B (2 Mark)
Compulsory maintenance of account is required u/s 44AA of IT, if the gross receipt/ total sales exceed _______
Section B (2 Mark)
Mr. A purchased certain shares of a company during the financial year 1987-88 for a sum of Rs.1,50,000/-. A sold the shares during the financial year 2011-12 for Rs.8,10,000/- when the market is at all time high. Calculate the amount of capital gains. [CII-12-13: 852,11-12: 785,10-11:711]
Section A (1 Mark)
Which of the following is NOT a dimension of service quality?
Section A (1 Mark)
With regard to hedge funds, ‘2 and 20’ is best explained as:
Section C (4 Mark)
Read the senario and answer to the question.
Nimita wants to know if she were to meet with an accident and get permanent disability in the third year of her Term Insurance policy, what amount of the premium due in the fourth year would be payable by her if the premium being paid towards the policy is Rs. 15,000 with sum assured of Rs. 50 lakh?
Section C (4 Mark)
Read the senario and answer to the question.
Keshav average purchase rate of Infosys share is Rs. 1,000/- per share. At present it is Rs.2,000/- per share. He wants to protect his gains. What would you advise him as the best Option? Assume Rate of 2010 Call is Rs 50, 2010 Put is Rs.55, 1980 Call is at Rs.60 and 1980 Put is at Rs.63. Assume that ten days are left for expiry of the Option.
Section A (1 Mark)
A ____________________ tax system places a relatively large tax burden on lower-income people and a relatively small tax burden on upper-income people.
Section B (2 Mark)
An investor is bearish about ABC Ltd. and sells ten one-month ABC Ltd. futures contracts at Rs.5,00,000. On the last Thursday of the month, ABC Ltd. closes at Rs.510. He makes a _________. (assume one lot = 100)
Section A (1 Mark)
A well-diversified portfolio is defined as
Section A (1 Mark)
According to Prospect Theory, investors are more concerned with changes in wealth than in returns. Prospect Theory suggests that investors:
Section B (2 Mark)
Which of the following are the ways to avoid escalation of commitment are listed below?
Section A (1 Mark)
Which of the following options is not true about CODICIL?
Section A (1 Mark)
The way to reduce tax liability by taking full advantage provided by the Act is
Section C (4 Mark)
Samantha celebrated her 21st birthday today, her father gave her Rs. 6,25,000/- which is deposited in a account that pays a ROI of 12.25% p.a. compounded monthly. If she wants to withdraw Rs. 7,50,000 on her 31st. Birthday and balance on her 41stBirthday. How much can she withdraw on her 41st. birthday ?
Section A (1 Mark)
After the satisfaction of insured’s claim from the insurer, the insured should pursue in the recovering of rights from the 3rd party.
Section B (2 Mark)
Basic Idea of retirement benefit plan is
Section A (1 Mark)
Which of the following statement is not true?
Section A (1 Mark)
____________refers to the tendency of people to think of currency in nominal, rather than real terms
Section A (1 Mark)
Under which of the following categories of General Warranty Deed does the Grantor warrants that the property is free of any liens or encumbrances unless they're specifically stated in the deed?
Section A (1 Mark)
Multi period hedging is ________
Section A (1 Mark)
Forecasting errors are potentially important because
Section A (1 Mark)
A good example of closed-end credit is:
Section A (1 Mark)
________ bias means that investors are too slow in updating their beliefs in response to evidence.
Section A (1 Mark)
What are the common methods an investors may use to value real estate investments?
Section B (2 Mark)
Calculate the standard deviation on a portfolio from the following data
Section A (1 Mark)
Debt ratio is
Section C (4 Mark)
Mr. Sushobhan Adhikari, 56 years old, employee of Mega India Ltd, receives the following salary and perquisites from his employer during the previous year 2007–08.
A rent-free furnished house in Patna (rent of unfurnished house paid by employer- Rs. 84,000, rent of furniture Rs. 18,000, free services of a gardener (salary-Rs. 4,000), free services of cook (salary-Rs. 3,600), free services of watchman (salary-Rs. 900). He owns a small house at Patna.
Mr. Adhikari makes the following payments and investments during the year:
Mr. Adhikari comes to Mr. Gupta, CWM®, in September-2008 for developing a wealth plan to fulfill his financial goals. Mr. Adhikari will retire on 31st December, 2008 after completing 28 years of service. He is expecting a growth of Rs. 1,500 in his basic pay in the last year of his employment. The company is expecting a 5% growth every year in its turnover. His daughter Pallavi has completed her education and his main liability is the amount he may have to spend for her marriage. On his retirement he is expected to receive following amount:
He also has also informed to the planner following his other assets and investments:
He has given his Kolkata Flat on 12,500 p.m. rent. Municipal value of the property is Rs. 1,45,000, fair rent is Rs. 1,60,000 and standard rent is 1,40,000. Municipal tax paid by him are as follows:
In July, 2008 rent is increased from Rs. 11,500 to Rs. 12,500 pm with effect from 01/04/2007. Due to some dispute rent was not received in 2007–08 but all arrears of rent till date are paid on July 1, 2008. Maximum eligible amount of PPF contribution deposited in March, 2008.
His actual expenses before retirement are Rs. 23,500 per month.
Main goals of Mr. Adhikari:
●To provide for his daughter’s marriage
●Ensuring that his family is protected financially in the event of any mishap
●Minimize tax burden
●Establish an investment portfolio that gives high returns over long term
Assumptions:
●Mr. Adhikari needs to provide for himself and his family till he is 75.
●Inflation rate after retirement to be 4%
●Monthly expenses after retirement will be 15% less than before retirement
After detailed discussion, Mr. Gupta, CWM®, has suggested a revision in the portfolio as below to be implemented from October, 2008.
Section A (1 Mark)
Technical analysis differs from fundamental analysis because technical analysis:
Section A (1 Mark)
The eligibility Criteria for Personal Loans Salaried Individuals for Maximum Age of Applicant at Loan Maturity in case of personal loan is:
Section B (2 Mark)
Mr. Kishan owns a factory producing some small spare parts.Under which policy he can get cover against the claim for paying damages and legal costs arising from any bodily injury or damage in the premises of his property ?
Section A (1 Mark)
A Wealth Management model in which private client and Institutional Asset Management are kept entirely separate is known as
Section A (1 Mark)
A company, other than an Indian Company would be a resident in India for the previous year if during that year its control and management is situated:
Section C (4 Mark)
Pacific Asia reported net income of Rs770 million in 1993, after interest expenses of Rs320 million. (The corporate tax rate was 36%.) It reported depreciation of Rs960 million in that year, and capital spending was Rs1.2 billion. The firm also had Rs4 billion in debt outstanding on the books, rated AA (carrying a yield to maturity of 8%), trading at par (up from Rs3.8 billion at the end of 1992). The beta of the stock is 1.05, and there were 200 million shares outstanding (trading at Rs60 per share), with a book value of Rs5 billion. Pacific Asia paid 40% of its earnings as dividends and working capital requirements are negligible. (The Risk Free rate is 7%.)
Estimate the free cash flow to the firm in 1993.
Section A (1 Mark)
During “Financial Independence” life stage, typical asset allocation should be
Section B (2 Mark)
Calculate the duration of a 10 year annual annuity that has a yield of 7%.
Section B (2 Mark)
The basic rate of income tax on non-savings incomein UK for tax year in 2011-12 is:
Section C (4 Mark)
Watts Industries, a manufacturer of valves for industrial and residential use, had the following projected free cash flows to equity per share for the next five years , in nominal terms.
The terminal price is based upon a stable nominal growth rate of 6% a year after year 5. The discount rate, based upon financial market rates, is 14%, and the expected inflation rate is 3%.
Estimate the value per share, using nominal cash flows and the nominal discount rate.
Section B (2 Mark)
Portfolio A has expected return of 10% and standard deviation of 19%. Portfolio B has expected return of 12% and standard deviation of 17%. Rational investors will
Section C (4 Mark)
United Healthcare, a health maintenance organization, is expected to have high earning growth for the next five years and 6% after that. The dividend payout ratio will be only 10% during the high growth phase, but will increase to 60% in steady state. The return on equity was 21% in the most recent time period and is expected to stay at that level for the next 5 years. The stock has a beta of 1.65 currently, but the beta is expected to drop to 1.10 in steady state. (The treasury bill rate is 7.25%.)
Estimate the price/book value ratio for United Healthcare, given the inputs above.
Section B (2 Mark)
___________ applies where there are multiple transactions which are inter-related and cannot be evaluated separately for the purpose of determining arm’s length price of any one transaction.
Section A (1 Mark)
The borrower's attitude toward his or her credit obligations is called:
Section B (2 Mark)
An employee benefit plan can generally help in accomplishing all of the following items except:
Section C (4 Mark)
The Puri’s family includes a financially well-informed couple, both aged 34, and two children aged 4 and 6. They are financially sound, but were not in the market during the Indian Bull market of the 2003 to 2007 as many of their neighbors were. The couple’s total income, Rs. 12,00,000, which they do not expect to grow significantly in times to come
They have saved 15,00,000, which they hope will be the financial foundation from which they will send their children to college and retire comfortably.
Which of the following biases does the Puri Family suffer from:?
Section B (2 Mark)
Information processing errors consist of
Section A (1 Mark)
Which of the following is an effective strategy in times of falling interest rates?
Section A (1 Mark)
The factors contributing to a Credit Score are :
Section B (2 Mark)
Which one of the following statements is/are correct?
Section A (1 Mark)
A type of lease where there is no payment schedule and penalty for a set period of lines.
Section A (1 Mark)
In case of self occupied property, higher deduction u/s24(b) for interest on loan for construction can be claimed if borrowing was made
Section B (2 Mark)
A financial institution plans to issue a group of bonds backed by a pool of automobile loans. However, they fear that the default rate on the automobile loans will rise well above 4 percent of the portfolio – the projected default rate. The financial institution wants to lower the interest payments if the loan default rate rises too high. Which type of credit derivative contract would you most recommend for this situation?
Section A (1 Mark)
The disposition effect relates to the fact that:
Section B (2 Mark)
In 2011-12, an individual receives a net dividend of £648. The equivalent gross income is:
Section A (1 Mark)
investment plan pays Rs. 1 lac at the beginning of 10th year for 5 years and Rs. 2 lacs for next 5 years. If the rate of interest is 10% per annum. What will be the present value of this investment?
Section A (1 Mark)
Which one of the following statements is false?
Section A (1 Mark)
Income from which trust is added to the beneficiary’s taxable income?
Section B (2 Mark)
The modified duration of a bond is 7.87. The percentage change in price using duration for a yield decrease of 110 basis points is closest to:
Section A (1 Mark)
The price that the buyer of a put option pays to acquire the option is called the
Section C (4 Mark)
Read the senario and answer to the question.
Ms. Deepika is interested in investments in foreign markets. Her brother is working in one of reputed American company in India and that is offering him some shares under ESOP scheme. This company is not listed in India. It is listed in New York Stock Exchange. Ms. Deepika is asking her manager how this transaction will took place for her brother?
Section B (2 Mark)
Which of the following statements is/are correct with respect to Mental Accounting?
Section B (2 Mark)
The following is not a capital receipt
Section A (1 Mark)
According to behavioral finance, investors prefer dividends because:
Section B (2 Mark)
Differences between hedge funds and mutual funds are that
Section C (4 Mark)
Suppose Sunil visits his favorite coffee shop and encounters his good friend Rohit. Rohit raves about his stockbroker, whose firm employs an analyst who appears to have made many recent successful stock picks. The conversation goes something like this:
SUNIL: Hi, Rohit, how are you?
ROHIT: Hi, Sunil. I’m doing great! I’ve been doing superbly in the market recently.
SUNIL: Really? What’s your secret?
ROHIT: Well, my broker has passed along some great picks made by an analyst at her firm.
SUNIL: Wow, how many of these tips have you gotten?
ROHIT: My broker gave me three great stock picks over the past month or so. Each stock is up now, by over 10 percent.
SUNIL: That’s a great record. My broker seems to give me one bad pick for every good one. It sounds like I need to talk to your broker; she has a much better record!
Which of the following biases have been exhibited by Gaurav?
Section A (1 Mark)
In case of Credit Assessment, if the lender accepts the application and takes it forward towards acceptance provided it passes through the risk assessment criterion, then the Credit Score Band of the borrower would be:
Section C (4 Mark)
Mr. Amit Jain has bought a house today which cost him Rs. 50 lacs by taking a loan of 30lacs for 15 years at 11% per annum compounded monthly. He currently has 10 lacs of financial assets and plans to save Rs. 3.25 lacs every year at the beginning of the year for the next 5 years. All his investments are expected to grow at a ROI of 15%per annum compounded quarterly. What will be the net worth of Mr. Amit after 5 years if the value of the house after 5 years is expected to be 75 lacs.
Section A (1 Mark)
Which of the following is/are the challenges of Private Banking?
Section A (1 Mark)
Family Offices provide _____________
Section C (4 Mark)
A 14% semiannual-pay coupon bond has six years to maturity. The bond is currently trading at par. Using a 25 basis point change in yield, the effective duration of the bond is closest to:
Section A (1 Mark)
Mr.Gopal is working in a reputed company and earning Rs. 3,00,000/- p.a. and is now 48 years old. He has invested Rs. 3,00,000/- in an annuity which will pay him after 5 years a certain amount p.m. at the end of every month for 10 years. Rate of interest is 8% p.a. Calculate how much he will receive at the end of every month after 5 years?
Section A (1 Mark)
The principle of _____________ ensures that an insured does not profit by insuring with multiple insurers
Section C (4 Mark)
Suppose ABC Ltd. is trading at Rs 4500 in June. An investor, Mr. A, shorts Rs 4300 Put by selling a July Put for Rs. 24 while shorting an ABC Ltd. stock. The net credit received by Mr. A is Rs. 4500 + Rs. 24 = Rs. 4524.
What would be the Net Payoff of the Strategy?
• If ABC Ltd closes at 4053
• If ABC Ltd closes at 5025
Section B (2 Mark)
The Net Worth Required for an Individual is _________________ for a Partnership Firm is ____________________ and Body Corporate is______________ to fulfil the Capital Adequacy requirements under the SEBI Investment Advisor Regulations 2013.
Section B (2 Mark)
In a collateralized mortgage obligation (CMO) a tranche:
Section A (1 Mark)
The tendency to seek and interpret information that confirms existing beliefs. Our conclusions are unduly biased by what we want to believe. Which of the following is most likely consistent with this bias?
Section A (1 Mark)
The principle in real estate valuation which acknowledges limitation on growth in market value, not ably in the case of improvements is known as:
Section A (1 Mark)
A(n) _____________ is an over-the-counter agreement offering protection against loss when default occurs on a loan or other debt instrument.
Section C (4 Mark)
Read the senario and answer to the question.
Sajan wants to cover for the expenses of his family without compromising their present lifestyle till the expected life time of Jennifer in case of his untimely death. He consumes 8% of monthly expenses exclusively on self. You advise him that the child plan covers a different goal. Assuming the cover proceeds are invested in a Balanced MF scheme, he should supplement his cover by taking a term insurance for _________ immediately to cover such future expenses. (Please ignore taxes and charges, if applicable, in regular withdrawals from Balanced MF scheme to meet proposed monthly expenses).
Section C (4 Mark)
Read the senario and answer to the question.
Portfolio A had a return of 12% in the previous year, while the market had an average return of 10%. The standard deviation of the portfolio was calculated to be 20%, while the standard deviation of the market was 15% over the same time period. If the correlation between the portfolio and the market is 0.8, what is the Beta of the portfolio A?
Section C (4 Mark)
Ms. Shweta wants to achieve the goal of higher education of her daughter after 15 years. She estimates that the funds required would be 30 lacs at then costs. She wants to invest monthly for this goal. You as a Wealth Manager suggest an asset allocation of 80% in Equity and 20% in Debt for 14 years and shifting the entire amount to liquid funds in the last year where the expected returns would be 6% p.a. If the returns in equity and debt funds are 14% and 8.50% respectively calculate the amount that needs to be invested in Equity and Debt Each Month.
Section A (1 Mark)
Which of the following is a risk of using credit derivatives?
Section A (1 Mark)
In US which of the following does not count as an itemized deduction on income tax?
Section B (2 Mark)
Choose the amount of final tax liability of R for the assessment year 2007-08:
Section B (2 Mark)
Vikash has following portfolio with related details given below:
Calculate the portfolio beta?
Section C (4 Mark)
Read the senario and answer to the question.
Assume Reena retires at the age of 60 years and invests her salary at 8% p.a.What will be the future value of Reena’s salary at the time of her retirement if she saves her entire salary?
Section A (1 Mark)
What amount needs to be invested today at 10 % per annum, so that it pays Rs. 1 lac per annum for 5 years, starting from 6th year to 10thyear. First payment starts at BEGIN of 6thyear.?
Section A (1 Mark)
The definition of a drawdown is
Section A (1 Mark)
__________ is a tangible company asset that can (and should) be inventoried and managed.