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NEW QUESTION 549
Section B (2 Mark)
Fifteen Year ago, Sandeep set up his initial allocation in her defined contribution plan by placing an equal amount in each asset class and never changed it. Over time, he increased his contribution by 3 % per year until he reached maximum amount allowed by law. Which of the following biases that Sandeep suffers from?

• A. Confirmation Bias
• B. Availability Bias
• C. Status Quo Bias
• D. Representativeness Bias

Answer: C

 

NEW QUESTION 550
Section B (2 Mark)
The income exemption threshold in respect of income year ending 30 June 2009 is as follows for an individual with two dependents in Mauritus is:

• A. 3,50,000
• B. 3,95,000
• C. 410,000
• D. 2,85,000

Answer: C

 

NEW QUESTION 551
Section B (2 Mark)
Ajay is considering to purchase a house which will bring rental income of Rs. 15,000/- p.m at the end of month. Ajay is looking for 12% returns and he is expecting to sell the property after 5 years for Rs. 6 lac.
What price Ajay should pay for this property now?

• A. Rs. 395000
• B. Rs. 400000
• C. Rs. 468000
• D. Rs. 495000

Answer: A

 

NEW QUESTION 552
Section A (1 Mark)
A loan where the borrower pays interest each period, and repays some or all of the principal of the loan over time is called a(n) _________ loan.

• A. Balloon
• B. Pure discount
• C. Amortized
• D. Continuous

Answer: C

 

NEW QUESTION 553
Section A (1 Mark)
A principal weakness of the Dow Theory is:

• A. That it pays too much attention to primary trends.
• B. Its use of averages instead of indexes.
• C. The many versions that are available.
• D. Its attention to general market movements

Answer: C

 

NEW QUESTION 554
Section C (4 Mark)
The probability distribution of the rate of return on ABC stock is given below:

What is the standard deviation of return?

• A. 10.50%
• B. 13.50%
• C. 11.40%
• D. 12.90%

Answer: D

 

NEW QUESTION 555
Section A (1 Mark)
AUM stands for

• A. Asset Under Management
• B. None of the above
• C. Area Under Management
• D. Asset Utilization Model

Answer: A

 

NEW QUESTION 556
Section A (1 Mark)
Disclaimers and assumptions are a part of

• A. Data gathering
• B. Wealth Plan
• C. None of the above
• D. Research Notes

Answer: B

Explanation:
Section C (4 Mark)
Harish Rawat has approached you on 26th Nov 2010, a Chartered Wealth Manager, for preparing a comprehensive Wealth plan to accomplish his financial goals. From your initial meeting, you have gathered the following information:

Harish Rawat, aged 44 years with life expectancy 70 years, is self-employed in Dehradun. Harish's wife Sonali, aged 41 years with life expectancy 72 years, is working as a Assistant Manager in a Telecom Company and is having a post-tax income of Rs. 4 lakh p.a. She is expected to retire at the age of 55 years.
The couple has two children Chirag, aged 16 years and Vishesh, aged 10 years. Chirag is studying in 10th standard while Vishesh is studying in 4th standard. Harish's net annual Income from retail medical store is Rs.
8 Lakh and their monthly household/living expenses, excluding housing loan EMI, are Rs. 32,500.
Harish is a Graduate. He earlier served in a pharmaceutical company as a medical representative for approx.
10 years. After separation from the company, he started his own wholesale business of medicines but could not sustain for long due to lack of working capital. He shut down his operations after 3.5 years. Thereafter he got a contract for retail medical shop in the premises of a nursing home. The terms of the contact are profit sharing in the ratio 50:50. Investment in stock and handling all activities of medical store are of Harish and no rent is charged by the owner of nursing home.
Harish had taken a housing loan of Rs. 15 Lakh disbursed on 1st April 2005. They are presently paying an EMI of Rs. 17,285 at the end of every month beginning from the month of disbursement. The loan is at fixed rate of interest of 11.25% p.a. (reducing monthly balance basis) with tenure of 15 years. Harish has taken a money back insurance plan of 20 year term with sum assured of Rs. 6 Lakh, the annual premium being Rs.
26,250. He has paid 14 annual premiums till date regularly. The policy provides for 20% of the basic sum assured to the insured as survival benefit after 4th, 8th, 12th, 16th years from the start of the policy. He has also taken a Mediclaim family floater policy which covers his spouse and two sons to the extent of Rs. 5 Lakh.
He has also paid four regular annual premiums of Rs. 36,000 in a unit linked pension plan and next premium is due on 1st Dec 2010.
Harish's parents are senior citizens and live in their own house in Haldwani District. Their only source of income is by way of interest received from their joint Senior Citizen Savings Scheme account. Harish's younger brother, who is also self-employed, is living with his parents.
Harish had invested Rs. 1 lakh to buy 200 shares of a listed company, Mobizox, in the year 2001-02. The Company had issued Bonus shares in the ratio 1:1 in the year 2005-06.Harish also subscribed to the Company's Rights issue of one share for every four shares held at a price of Rs. 250 per share in Feb 2010.
Harish also invested Rs. 4 lakh in an Agriculture land at his native village in Haldwani in 2000-01.
Goals and aspirations
1.To make provision for their children's higher education expenses at their respective age of 21 years.
2.Such expenses are Rs. 5 lakh for each child at current prices.
3.To make provision for children's marriage expected at the end of 10 years and 15years from now; presently valued at Rs. 5 lakh each.
4.Build a corpus for his retirement at the age of 58 years
5.To go on vacation with family in January, 2011
Assumptions
1.Inflation is currently 6% p.a. and is likely to remain the same.
2.Risk free interest rate is at 7% p.a.
3.Return on equity MF is 12% p.a.
4.Return on debt MF is 8% p.a.
5.Cost Inflation index is 281 for 1995-96, is 406 for 2000-01, is 463 for 2003-04, is 551for 2007-08, is 582 for
2008-09 and is 632 for 2009-10.

 

NEW QUESTION 557
Section B (2 Mark)
Which of the following is closest to the forward price of a share price if

Dividend expected is 6%?

• A. Rs. 705
• B. None of these
• C. Rs. 845
• D. Rs. 795

Answer: D

 

NEW QUESTION 558
Section A (1 Mark)
All of the following are examples of capital expenditures except:

• A. Lawn maintenance
• B. Constructing a new school
• C. All of the above are examples of capital expenditures.
• D. Purchasing a new police vehicle

Answer: A

 

NEW QUESTION 559
Section A (1 Mark)
The two primary tools of a technical analyst are:

• A. Price and technical indicators
• B. Level of the market index and volume
• C. Price and volume
• D. Economic indicators and level of the market index

Answer: C

 

NEW QUESTION 560
Section A (1 Mark)
Tarun has Rs. 100000/- in a account and starts investing Rs. 7500/-per month at the beginning of the month. If the account pays 10% p.a interest compounded half yearly. What will be the accumulated amount in his account after 20 years.

• A. 6597345.23
• B. 5593465.19
• C. 6623456.23
• D. 5923472.45

Answer: B

 

NEW QUESTION 561
Section B (2 Mark)
Dharampal has let out his house property at monthly rate of Rs. 12000. He has paid Rs.3500 as annual municipal tax. He wants to know the Net Annual value of his house at Bhuj for AY 2011-12. The Municipal value of the house is Rs. 90,000, Fair rent Rs. 1,40,000, Standard rent Rs. 1,20,000. The house was vacant for one month during the previous year 2010-11 and the rent has not changed since then.

• A. Rs. 1,32,000
• B. Rs. 1,36,500
• C. Rs. 1,40,500
• D. Rs. 1,28,500

Answer: D

 

NEW QUESTION 562
Section B (2 Mark)
Reproduction cost has been estimated as Rs 350,000 for a property with a 70-year economic life. The current effective age of the property is 15 years. The value of the land is estimated to be Rs 55,000. What is the estimated market value of the property using the cost approach, assuming no external or functional obsolescence?

• A. Rs 2,50,000
• B. Rs 3,30,000
• C. Rs 3,45,500
• D. Rs 2,75,000

Answer: B

 

NEW QUESTION 563
Section A (1 Mark)
According to behavioral finance, investors prefer dividends because:

• A. The discipline that comes from spending only the dividends
• B. The stock market is efficient
• C. All of the above
• D. The tax consideration

Answer: A

 

NEW QUESTION 564
Section A (1 Mark)
Deduction under section 80-IC is allowed to the extent of:

• A. None of These
• B. 100% of profits and gains for ten assessment years
• C. 100% of profits and gains for ten assessment years in case of any undertaking or enterprise in the States of Sikkim or North Eastern Region and 50% in case of undertaking in Uttaranchal and Himachal Pradesh
• D. 100% of profits and gains for ten assessment years in case of an undertaking or enterprise in the States of Sikkim or North Eastern States and 100% of profits and gains for the first 5 assessment years and
  25% (30% in case of companies) for next 5 assessment years.

Answer: D

 

NEW QUESTION 565
Section A (1 Mark)
Manish is thinking of acquiring some shares of ABC Ltd. The rate of returns is as follows:

Calculate the expected return on the investments

• A. 9.5
• B. 1.6
• C. 7.6
• D. 5.2

Answer: C

 

NEW QUESTION 566
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

• A. Sell A short and buy B.
• B. Sell B short and buy A.
• C. Borrow at the risk free rate and buy B.
• D. Borrow at the risk free rate and buy A.

Answer: A

 

NEW QUESTION 567
Section C (4 Mark)
Maxis Ltd reported Earnings Per Share of Rs 2.10 in 1993, on which it paid dividends per share of Rs 0.69.
Earnings are expected to grow 15% a year from 1994 to 1998, during which period the dividend payout ratio is expected to remain unchanged. After 1998, the earnings growth rate is expected to drop to a stable 6%, and the payout ratio is expected to increase to 65% of earnings. The firm has a beta of 1.40 currently, and it is expected to have a beta of 1.10 after 1998. The Risk Free Rate of Return is 6.25%.
What is the value of the stock, using the two-stage dividend discount model?

• A. 26.5
• B. 26.75
• C. 27.59
• D. 35.15

Answer: C

 

NEW QUESTION 568
Section A (1 Mark)
A business angel is best described in which one of the following statements?

• A. A friendly firm which agrees to a merger with a company so that another firm cannot take control of that company
• B. A wealthy individual, generally with substantial business and entrepreneurial experience, who invests primarily in start-up, early stage or expanding firms
• C. A philanthropic benefactor of a firm who supports the firm with cash injections to enable it to pursue goals other than shareholder wealth maximization
• D. A person with an extensive knowledge of business who is hired for the purpose of taking control of a firm in very poor circumstances

Answer: B

 

NEW QUESTION 569
Section A (1 Mark)
When loans are securitized they are passed on to a ____________who pools the loans and sells securities.

• A. Special Purpose Entity
• B. Deemed Entity
• C. Multi Purpose Vehicle
• D. None of the Above

Answer: A

 

NEW QUESTION 570
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?

• A. 73.9%, -57.5%
• B. 73.9%, -100%
• C. 173.9%, -100%
• D. 57.5%, -173.9%

Answer: B

 

NEW QUESTION 571
Section B (2 Mark)
Calculate the standard deviation on a portfolio from the following data

• A. 11.34
• B. 17.25
• C. 14.23
• D. 5.15

Answer: D

 

NEW QUESTION 572
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?

• A. 29.76 months
• B. 27.20 months
• C. 4.80 months
• D. 2.26 months

Answer: D

 

NEW QUESTION 573
Section C (4 Mark)
Shikha has an investment portfolio of Rs.100000, a floor of Rs.75000, and a multiplier of 2. So the initial portfolio mix is 50000 in stocks and 50000 in bonds. If stock market goes up by 20%, what should Shikha do?

• A. She should buy Rs.10000 of stocks and sell Rs.10000 of bonds
• B. She should sell Rs.10000 of stocks and invest it into bonds
• C. She should sell his portfolio equally
• D. She should sell Rs.10000 of bonds and invest it into stocks

Answer: A

 

NEW QUESTION 574
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