Final PN-14 SFM Quiz 9

1. Portfolio return = 15%, Rf = 5%, β = 1.2, Rm = 12%.

Alpha = ?

2. Which of the following can reduce unsystematic risk?

3. Liquidity risk in a portfolio refers to:

4. Which of the following is considered a “reward-to-volatility” measure?

5. A company is considering leasing a machine costing Rs.20,00,000 for 3 years. The lease rentals are Rs.6,00,000 per year payable at the end of each year. If the cost of debt is 10%, what is the Present Value (PV) of lease payments?

6. A company has an option to lease equipment for Rs.4,00,000 per year for 4 years or purchase it for Rs.12,00,000 financed by 12% debt repayable in 4 equal instalments. Assuming no taxes, which is cheaper?

7. Asset cost = Rs.12,00,000. Lease term = 5 years. Tax = 30%. Discount rate = 10%. What annual lease rental (before tax) makes the lessee indifferent?

8. Lease rental = Rs.7,00,000 per year for 4 years. Asset cost = Rs.24,00,000. Tax = 35%. Discount rate = 12%. Should the company lease?

9. A machine can be leased at Rs.4,00,000 p.a. for 3 years or Rs.3,00,000 p.a. for 5 years. Discount rate = 10%, tax ignored. Which lease term is cheaper in PV terms?

10. EPS = Rs.30, P/E = 12. Find intrinsic price.

11. Face Value= Rs.5,000, maturity 5 yrs, YTM = 9%. Price of the bond = ?

12. If a stock has expected return = 15%, β = 1.5, Rf = 5%, Market premium = 8%, is the stock overvalued or undervalued?

13. The beta of a mutual fund indicates:

14. Systematic Withdrawal Plan (SWP) allows investors to:

15. Which of the following is an example of a hybrid mutual fund strategy?

16. Load in mutual funds refers to:

17. Which type of mutual fund invests primarily in debt instruments?

18. The Net Asset Value (NAV) of a mutual fund represents:

19. Stablecoins are designed to:

20. Which technology allows digital finance companies to predict customer behavior and creditworthiness?

21. Which type of digital currency is issued and regulated by a central bank?

22. Which of the following best defines currency risk?

23. Which type of risk cannot be eliminated through diversification?

24. Which of the following is an example of operational risk?

25. A currency option gives the holder the right to:

26. Cross rate refers to:

27. If the USD appreciates against the INR, what will be the impact on Indian importers?

28. In the foreign exchange market, the direct quote method expresses

29. In the foreign exchange market, if the spot rate of USD/INR is Rs.85.20 and the 3-month forward rate is quoted at Rs.85.80, what does this indicate?

30. An Indian company plans to make an investment in the United States. The expected annual inflation rates are 6% in India and 2% in the USA. If the current spot rate is Rs.85.2 per US dollar, what is the expected spot rate after 5 years, assuming the inflation rates remain constant over this period?"

31. ABC Ltd., a valued customer engaged in import business, needs to remit EURO 1 million to its European exporter. The following spot rates are available:

₹/US$ = ₹85.47/85.57 US$/€ = $0.8501/0.8505

If the bank charges a margin of 0.50%, what rate will the banker

quote to ABC Ltd.?

32. You are a forex dealer in India. The prevailing international market rates are:

1Rs. = US $0.0117647

1 £ = US $1.341032

What will be your direct quote for £ (pound) in terms of Rs.(rupees) to your customer?

33. RRR Ltd. is planning to invest in the USA. The annual inflation rates are 5% in India and 2% in the USA. If the current spot rate is Rs.85.5/$, what spot rate can the company expect after 3 years?

34. The spot and 6-month forward rates of the US dollar against the Indian Rupee are as follows:

Spot Rate (Rs./$): Rs.84.532 / Rs.85.4143

6-Month Forward Rate (Rs./$): Rs.85.1278 / Rs.86.2538

Calculate the annualized forward margin with respect to the Ask price.

35. A stock has positive alpha. What does it indicate?

36. Market risk premium = 10%, β = 1.8. What is stock’s risk premium?

37. A stock has a beta (β) of 0.75. What does this indicate about the stock’s volatility relative to the market?