CWM_LEVEL_2 Chartered Wealth Manager (CWM) Certification Level II Examination Questions

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Chartered Wealth Manager (CWM) certification Level II CWM_LEVEL_2 exam is online MCQs with no negative making and its passing percentage for CWM_LEVEL_2 exam is 50%. The time duration of CWM level 2 exam is 3 hours.

20% weightage in the CWM Level 2 exam is given to Level 1. To pass CWM_LEVEL_2 exam easily, the new cracked questions are great. Free AAFM certification CWM_LEVEL_2 exam questions are below.

Page 1 of 38

1. Section B (2 Mark)

The basic rate of income tax on non-savings incomein UK for tax year in 2011-12 is:

20%

10%

40%

50%

2. Section A (1 Mark)

Which of the following is true regarding the resistance level?

It tends to develop due to profit taking.

It is the level at which a significant decrease in demand is expected.

It is the level at which a significant increase in supply is expected.

It usually develops after a stock reaches a new low.

3. Section A (1 Mark)

Which of the following will be specifically considered while assessing a property and establishing comparisons with other properties?

Marketability

Location

Legal attributes

All of the above.

4. Section B (2 Mark)

As per Double Taxation Avoidance Agreement, the Royalties in Mauritius is charged at:

Nil

5. Section A (1 Mark)

Which of the following characteristics are unique to real estate that differ from other asset classes?

Immobile

Indivisible

Somewhat illiquid, and each property is unique, making valuation difficult.

All of the above

6. Section B (2 Mark)

If an investor determines that next year’s earnings estimate is Rs2.00 per share and the company subsequently falters, the investor may not readjust the Rs2.00 figure enough to reflect the change because he or she is “anchored” to the Rs2.00 figure. This is not limited to downside adjustments―the same phenomenon occurs when companies have upside surprises

Which of the following Biases have been exhibited by the investor?

Representative bias

Anchoring and Adjustment Bias

Framing bias

Loss Aversion bias

7. Section B (2 Mark)

Amount of liability of payment of gratuity is calculated at the rate of

One month’s wage for each completed year of service

20days wages for each completed year of service

Half a month’s wage for each completed year of service

15 day’s wage for each completed year of service

8. 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:

Active Accumulator

Independent Individualist

Friendly Follower

Passive Preserver

9. Section A (1 Mark)

To try to develop a property’s competitive edge, an investor should consider which of the following?

Property management & Improvement

Location & site characteristics

Restrictions on use

All of the above

10. Section A (1 Mark)

Which among the following is not an advantage of setting up a trust?

Allows for orderly distribution of assets and income following death

Ensures that the estate poses to the intended beneficiaries

Tax planning

Protects against money laundering

Page 2 of 38

11. Section A (1 Mark)

The concept of indemnity is based on the key principle that policyholders should be prevented from

Insuring existing losses

Making false insurance claims

Paying excessively for insurance cover

Profiting from insurance

12. Section B (2 Mark)

Total income for assessment year 2007-08 of an individual including long-term capital gain of Rs. 60,000 is Rs. 1,40,000. The tax on total income shall be:

Rs. 8,800

Rs. 8,160

Rs. 7,000

Rs. 5,000

13. Section A (1 Mark)

Data for five comparable income properties that sold recently are shown below:

What is the indicated overall rate (RO)?

9.54

10.05

11.5

12.25

14. Section A (1 Mark)

Monitoring and rebalancing a portfolio over time involves all of the following costs EXCEPT

Commissions.

Possible impact on market price.

Holding a portfolio that is no longer adequately diversified.

Time involved in decision making.

15. Section A (1 Mark)

In US which group is unlikely to support tax limitations?

People who benefit from government spending

People whose tax burdens are heaviest

People who think government wastes a lot of money

Conservatives and Republicans

16. Section A (1 Mark)

Deduction under section 80C shall be allowed:

from the gross total income of the individual or HUF

from the income from long-term capital gain

from the gross total income other than long-term capital gain from any asset and short-term capital gain on shares sold through recognized stock exchange

from the gross total income other than long-term capital gain

17. Section B (2 Mark)

Why tilting your portfolio towards growth stocks, may theoretically amplify its performance?

Because all growth stocks are small C company stocks.

Because companies that are growing at a decent rate should outperform companies growing at a slower rate.

Tilting your portfolio towards growth isn’t a good strategy for aggressive investors.

None of the Above

18. Section B (2 Mark)

Mr. Murti is working in a reputed company and earning Rs. 4,00,000/- p.a. and is now 50 years old. He has invested Rs. 1,50,000/- in an annuity which will pay him after 5 years a certain amount p.m. at the beginning of every month for 10 years. Rate of interest is 8% p.a.

Calculate how much he will receive at the beginning of every month after 5 years?

2623

2598

2871

2656

19. Section B (2 Mark)

Which of the following statements is / are correct?

I, II and III

I and III

II and IV

All of the above

20. Section B (2 Mark)

Payment of Gratuity Act 1972 is applicable to

Every factory establishment

An establishment employing more than 10 employees

Both the above

None of the above

Page 3 of 38

21. Section C (4 Mark)

Read the senario and answer to the question.

The present household expenses of Mr Bhatia is Rs. 3,00,000 p.a. but if he were to retire today he would require only Rs. 2,25,000 p.a. Calculate his required retirement corpus if interest rate is 12% p.a. and inflation rate is 7%.

Rs. 1,53,87,451

Rs. 1,74,78,345

Rs. 1,61,06,405

Rs. 1,50,04,378

22. Section A (1 Mark)

Adjusted gross income is used in establishing limits on the following deductions, with the exception of

Charitable contributions.

Casualty losses.

Employee business expenses reimbursed by the employer.

Medical expenses.

23. Section B (2 Mark)

If two customers choose exactly the same package of certain service, but customer A calls for help weekly and customer B calls only twice a year, which is most valuable customer?

Both A & B customer

Customer A

Customer B

None of the above

24. Section C (4 Mark)

Consider the following information for three mutual funds

Risk free return is 7%. Calculate Treynor measure?

4.55, 8.89, 5.83

3.25, 6.78, 4.65

4.35, 7.78, 4.35

3.75, 7.85, 5.78

25. 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 Companies are:

26. Section A (1 Mark)

Which of the following is an effective strategy in times of falling interest rates?

Use long-term loans to take advantage of current low rates.

Use short-term loans to take advantage of lower rates when you refinance the loans.

Select short-term savings instruments to take advantage of higher rates when they mature.

Select short-term savings instruments to lock-in earnings at current high rates.

27. Section B (2 Mark)

Differences between hedge funds and mutual funds are that

Hedge funds are only subject to minimal regulation.

Hedge funds are typically open only to wealthy or institutional investors.

Hedge funds managers can pursue strategies not available to mutual funds such as short selling, heavy use of derivatives, and leverage.

All of the above

28. Section A (1 Mark)

Which one of the following has not caused the huge growth in hedge funds and private equity?

Financial institutions looking for a better rate of return

The freedom of hedge fund managers to use innovative methods of investing to increase returns

Tough financial regulations which promote greater investment and therefore better returns

Private investors seeking better returns

29. 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

147 and 157

0 and -451

-193 and 107

342 and 517

30. Section A (1 Mark)

The subscription paid into PPF account enjoys the tax benefit under

Sec 80D

Sec 10

Sec 80C

Sec 80G

Page 4 of 38

31. Section B (2 Mark)

Resident but not ordinary resident (RNOR) is ____________ on Indian Income and___________ on Foreign Income.

Taxable and Non Taxable

Non Taxable and Taxable

Taxable and Taxable

Non Taxable and Non taxable

32. Section A (1 Mark)

Division of the market into groups based on variables such as age, gender, size, income, occupation, education, religion, race and nationality comes under which of the following market segmentation?

Geographic segmentation

Psychographics segmentation

Demographic segmentation

Time segmentation

33. 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?

Residential mortgage loan

Installment loan

No installment loan

Revolving line of credit

34. Section B (2 Mark)

Suppose you are working with two factor portfolios, Portfolio 1 and Portfolio 2. The portfolios have expected returns of 15% and 6%, respectively. Based on this information, what would be the expected return on well-diversified portfolio A, if A has a beta of 0.80 on the first factor and 0.50 on the second factor? The risk-free rate is 3%.

15.20%

14.10%

13.30%

10.70%

35. 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?

Rs. 468000

Rs. 395000

Rs. 400000

Rs. 495000

36. Section A (1 Mark)

A zero-investment portfolio with a positive expected return arises when _________.

An investor has downside risk only

The law of prices is not violated

The opportunity set is not tangent to the capital allocation line

A risk-free arbitrage opportunity exists

37. Section B (2 Mark)

Mr. Patel expects the stock of A to sell for Rs. 70/- a year from now and to pay Rs. 4/-dividend.

If the stock’s correlation with the Market is C0.3, and the standard deviation of A is 40% and standard deviation of the Market is 20% and the risk free rate of return is 5% and the market risk premium is 5%, what would be the price of stock A be now?

73.65

72.55

75.65

38. Section B (2 Mark)

Calculate the beta on a portfolio from the following data:

1.5

1.29

0.96

1.23

39. Section C (4 Mark)

Mr. XYZ buys a Nifty Call with a Strike price Rs. 4100 at a premium of Rs. 170.45 and he sells a Nifty Call option with a strike price Rs. 4400 at a premium of Rs. 35.40.

What would be the Net Payoff of the Strategy?

• if Nifty closes at 4200

• if Nifty closes at 5447

145.95 and -75.05

-35.05 and 164.95

145.85 and -65.50

25.05 and 154.25

40. Section A (1 Mark)

Which of the following is not true in respect of CIBIL?

Pulling up CIBIL report is mandatory for all loans.

Mandate for pulling up the report and sharing of information from customer is mandatory.

Report is to be pulled up at the front end.

None of the above.

Page 5 of 38

41. Section A (1 Mark)

In order to have confirmation of a major market trend under the Dow Theory, the

Industrial and utility averages must confirm each other

Transportation and utility averages must confirm each other.

Utility average must lead the transportation average

Transportation and industrial average must confirm each other.

42. Section B (2 Mark)

You buy a share of ABC Ltd for Rs. 20. You expect it to pay dividends of Re.1, Rs.1.10 and Rs.1.21 in coming three years.

Calculate the growth rate in dividend:

10%

43. Section A (1 Mark)

In terms of the risk/return relationship

Only factor risk commands a risk premium in market equilibrium.

Only systematic risk is related to expected returns.

Only nonsystematic risk is related to expected returns.

A and

44. Section A (1 Mark)

We divide phenomena into different departments and try to optimize each department rather than the whole.

Which of the following is most likely consistent with this bias?

Anchoring and Adjustment Bias

Mental accounting

Confirmation bias

Hindsight bias

45. Section B (2 Mark)

Property A provides an annual income of Rs. 160,000 and a similar property B has sold based on 8 % capitalization rates. Calculate the value at which property A can be priced.

Rs. 20,00,000

Rs. 1,72,800

Rs. 2,35,092

Rs. 29,61,480

46. Section C (4 Mark)

To create a common size income statement ____________ all items on the income statement by ____________.

multiply; net income

multiply; total revenue

divide; net income

divide; total revenue

47. Section A (1 Mark)

Liquid assets comprise

Certificate of Deposits

Money Market Mutual Funds

Funds in savings account

All of the above

48. Section A (1 Mark)

____________represents people’s propensity to claim an irrational degree of credit for their successes.

Self Enhancing Bias

Self Attribution Bias

Self Protecting Bias

None of the Above

49. 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:

None of the Above

50. 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 __________.

Rs. 5,495

Rs. 5,454

Rs. 5,387

Rs. 5756

Page 6 of 38

51. Section C (4 Mark)

As a CWM you are required to calculate the tax liability of an individual whose Taxable income is:

• $ 85650 in US dollars and he is a US citizen (single individual)

• $ 159000 in SGD and he is a citizen of Singapore

17442.50 USD and 22260 SGD

15860.50 USD and 15680 SGD

16580.50 USD and 16100 SGD

25480 USD and 15870 SGD

52. Section A (1 Mark)

In …………………without delivery possession of the mortgaged property, there mortgager binds himself personally to pay the mortgage money

Usufructuary mortgage

Simple mortgage

English mortgage

Anomalous mortgage

53. Section B (2 Mark)

In _____________ first the cost incurred by the supplier of property is determined. An appropriate cost plus mark-up is then added to the cost so as to arrive at an appropriate profit in the light of the functions performed and market conditions.

Comparable Uncontrolled Price Method [CUP]

Resale Price Method [RPM]

Cost-Plus Method [CPM]

Profit Split Method [PSM]

54. Section A (1 Mark)

________ refers to the activity of the real estate market as it reacts to the force of supply and demand.

Real Estate Cycle

Business Cycle

Market Cycle

Accounting Cycle

55. Section A (1 Mark)

The way to reduce tax liability by taking full advantage provided by the Act is

Tax Evasion

Tax Planning

Tax Management

Tax Avoidance

56. Section B (2 Mark)

Which of the following investment options would most likely be part of the portfolio of a Moderate investor?

I, III, IV and V

II, IV and V

I, III and IV

II, III and IV

57. Section B (2 Mark)

What is the correlation coefficient between the companies A and B, if their covariance is 23 and their standard deviation is 8 and 7 respectively?

0.78

0.72

0.41

0.67

58. Section B (2 Mark)

Which of the following is/are incorrect with respect to Draft guidelines of REITs in India?

Only III

III and IV

Only II

I and II

59. Section B (2 Mark)

Matrix Ltd has a current ratio of 1.6, and a quick ratio equal to 1.2. The company has Rs 20,00,000 in sales and its current liabilities are Rs 10, 00,000.

What is the company’s inventory turnover ratio?

5.2

5.5

60. Section C (4 Mark)

Read the senario and answer to the question.

Assume Neeraj bought a second hand car in June 2007. Since the insurance premium was due, Neeraj paid it in the old owner’s name.Neeraj didn’t receive the original policy despite repeated requests. The car later met with an accident causing damages worth Rs. 10000.

Neeraj had not transferred the car in his name, as Neeraj did not have the original documents. Can the insurer reject his claim?

Claim will be entertained only to the amount of the insurance premium paid.

The claim will be entertained after Neeraj convert the vehicle in his name

The insurance company is well within its right not accepting the claim from Neeraj

No, as Neeraj has paid the insurance premium

Page 7 of 38

61. Section A (1 Mark)

Which of the following is not one a part of the primary stage in the Francis Buttle model?

Customer Portfolio Analysis

Customer Intimacy

Network Development

Organizational Design

62. Section A (1 Mark)

Which factor can trigger the stagnation or decline in value of a property?

Location obsolescence

Functional depreciation

Physical depreciation

All of the above

63. Section A (1 Mark)

_________________makes us throw more good money after money already gone bad.

Sunk Cost Fallacy

Money Illusion

Present-biased preferences

Inter Temporal Consumption

64. 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:

Rs. 17,000

Rs. 15,000

Rs. 30,000

Rs. 47,000

65. Section A (1 Mark)

The Net Operating Income (NOI) for a real estate investment is calculated as:

Gross potential income + vacancy and collection loss rate C insurance- real estate taxes-utility expenses- estimated maintenance expenses

Gross potential income-vacancy and collection loss rate C insurance- real estate taxes-utility expenses- estimated maintenance expenses

Gross potential income - vacancy and collection loss rate + insurance- real estate taxes-utility expenses- estimated maintenance expenses-financing cost

Gross potential income + vacancy and collection loss rate - insurance + real estate taxes-utility expenses- estimated maintenance expenses-depreciation

66. 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)

133 and (300)

725 and 285

350 and 185

202 and 301

67. Section A (1 Mark)

Under Nayak Committee Method the gross working capital is uniformly assumed to be a minimum of ________ of projected gross sales

20%

25%

15%

12%

68. Section A (1 Mark)

Manoj owns five hundred shares of ABC Ltd. Around budget time, he gets uncomfortable with the price movements.

Which of the following will give him the hedge he desires (assuming that one futures contract = 100 shares)?

Buy 5 ABC Ltd. futures contracts

Sell 5 ABC Ltd. futures contracts

Sell 10 ABC Ltd. futures contracts

Buy 10 ABC Ltd futures contracts

69. 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?

Covenant of seisin

Covenant against encumbrances

Covenant of quiet enjoyment

Covenant of further assurance

70. Section A (1 Mark)

________________ is the most important source of revenue for local governments in US

Income Tax

Sales Tax

Property Tax

None of the above.

Page 8 of 38

71. Section A (1 Mark)

A(n) _____________ is related to the credit option and is usually aimed at lenders able to handle comparatively limited declines in value but wants insurance against serious losses.

credit risk option

standby letter of credit

credit linked note

credit swap

72. Section B (2 Mark)

Rahul decides to deposit Rs. 5,000/- every month into an account yielding 12 % per annum compounded monthly for 20 years.

What will be the accumulated value in this account after 20 years and how much amount can be withdrawn from this account every month for a further period of 20 years of ROI is 8 % per annum compounded monthly?

41384.95

4946276

594523

40230.85

73. Section A (1 Mark)

As per Hindu succession Act

Full blood relations are preferred over half blood relations

Cognate heirs are preferred over agnate heirs

Both of the above are correct

None of the above are correct

74. Section A (1 Mark)

Where the return of income is filed after the due date specified u/s 139(1):

all deductions under Chapter VIA i.e. 80C to 80U will be allowable

all deductions under Chapter VIA i.e. 80C to 80U will not be allowable

all deductions under Chapter VIA i.e. 80C to 80U excepting 80-IA, 80-IAB, 80-IB, 80-IC will be allowable

all deductions under Chapter VIA i.e. 80C to 80U except 80-IA will be allowable

75. Section A (1 Mark)

Mr. Dhir is now 50 years old. He has invested Rs. 1,50,000/- in an annuity which will pay him after 10 years a certain amount p.a. at the beginning of every year for 10 years.

Rate of interest is 7% p.a. Calculate how much he will receive at the beginning of every year after 10 years?

40254

39263

41234

38764

76. 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.

Rs. 1,40,500

Rs. 1,36,500

Rs. 1,28,500

Rs. 1,32,000

77. Section C (4 Mark)

NCH Corporation, which markets cleaning chemicals, insecticides and other products, paid dividends of Rs2.00 per share in 1993 on earnings of Rs4.00 per share. The book value of equity per share was Rs40.00, and earnings are expected to grow 6% a year in the long term. The stock has a beta of 0.85, and sells for Rs60 per share. (The treasury bond rate is 7%.)

Based upon these inputs, estimate the price/book value ratio for NCH and How much would the return on equity have to increase to justify the price/book value ratio at which NCH sells for currently?

0.75 and 17.40%

0.93 and 16.08%

0.85 and 16.50%

0.67 and 18.05%

78. Section C (4 Mark)

Read the senario and answer to the question.

You have reviewed the investments of Nimita for the purview of retirement. You advise that a balance be restored from risk perspective and accordingly Rs. 15 lakh be shifted to a Debt MF scheme. You advise to further start SIPs immediately in the ratio of 60:40 in the newly started debt MF scheme and the existing Equity MF scheme for the next 21 years to accumulate a corpus so that the same sustains for the next 25 years if invested in an investment instrument yielding 7.50%.

What approximate amount of SIPs should be made in Debt and Equity MF schemes?

Rs. 58,000 in Debt MF scheme & Rs. 39,000 in Equity MF scheme

Rs. 55,400 in Debt MF scheme & Rs. 37,000 in Equity MF scheme

Rs. 60,000 in Debt MF scheme & Rs. 40,000 in Equity MF scheme

Rs. 42,000 in Debt MF scheme & Rs. 28,000 in Equity MF scheme

79. Section B (2 Mark)

The estimated Net Operating Income of an office building is Rs. 12000 per year.

An appraiser decide the appropriate capitalization rate is 12% comprised of 10% return on investment and 2% for depreciation, what is the estimated value of the building?

Rs. 1,00,000

Rs 1,20,000

Rs 1,44,000

Rs 1,50,000

80. Section C (4 Mark)

Nifty is presently at 2694. Mr. XYZ expects Nifty to fall. He buys one Nifty ITM Put with a strike price Rs. 2800 at a premium of Rs. 132 and sells one Nifty OTM Put with strike price Rs. 2600 at a premium Rs. 52.

What would be the Net Payoff of the Strategy?

• If Nifty closes at 2359

• If Nifty closes at 3561

120 and -80

-75 and 197

65 and 145

-156and 91

Page 9 of 38

81. 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.

Rs.38

Rs.54

Rs.34

Rs.45

82. Section C (4 Mark)

Data on following mutual funds is given below:

Risk free return is 8%. Calculate Sharpe measure.

0.45, 0.98, 0.33

0.72, 0.26, 0.31

0.95, 0.16, 0.31

0.61, 1.05, 0.59

83. Section A (1 Mark)

A 5 year ordinary annuity has a future value of Rs. 1,00,000/-.

If ROI is 8 % per annum, then how much will be the amount of each payment?

17,045.64

16532.23

11000.44

13000.75

84. 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).

Rs. 78 lakh

Rs. 85 lakh

Rs. 79 lakh

Rs. 76 lakh

85. 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.

Credit Derivative

Credit Derivative Obligation

Collateralized Debt Obligation

Collateralized Default Obligation

86. Section A (1 Mark)

A bank that wants to protect itself from higher credit costs due to a decrease in its credit rating might purchase _________________________.

A credit risk option

A standby letter of credit

A credit linked note

A credit swap

87. Section A (1 Mark)

Which of the following statements is/are correct with respect to naïve diversification?

Only I

Only II

Both of the above

None of the Above

88. Section B (2 Mark)

Consider the multifactor model APT with two factors. Portfolio A has a beta of 0.75 on factor 1 and a beta of 1.25 on factor 2. The risk premiums on the factor 1 and factor 2 portfolios are 1% and 7%, respectively. The risk-free rate of return is 7%. The expected return on portfolio A is __________ if no arbitrage opportunities exist.

13.50%

15.00%

16.50%

23.00%

89. Section C (4 Mark)

Consider the multifactor APT. There are two independent economic factors, F1 and F2. The risk-free rate of return is 6%.

The following information is available about two well-diversified portfolios:

Assuming no arbitrage opportunities exist, the risk premium on the factor F1 portfolio should be __________.

90. Section A (1 Mark)

The most profitable credit card customers for a bank are those that:

Use their credit card frequently

Pay off any charges incurred within a few days

Charge at least Rs 5,000 per year

Use their credit card as a source of installment loans

Page 10 of 38

91. Section A (1 Mark)

Minimum number of employees in an establishment for it to come under the purview of the Payment of Gratuity act is ______

20 and above

Above 20

10 and above

Above 10

92. Section A (1 Mark)

HNWI stands for

High Non Working Individuals

High Net Worth Individuals

High Net Worth Industries

None of the above

93. Section B (2 Mark)

___________, the net profit margin realized by the enterprise from an international transaction entered into with an associated enterprise is computed in relation to cost incurred or sales affected or assets employed or to be employed in the enterprise or having regard to any relevant base.

Transactional Net Margin Method

Cost-Plus Method

Profit Split Method

All of the Above

94. Section A (1 Mark)

Hedge funds often seek to take advantage of market inefficiencies such as:

High transaction costs.

Pricing differentials between derivative contracts and the underlying security.

Technological developments aiding informational efficiencies.

Similar prices in different geographic locations.

95. Section B (2 Mark)

A stock with a Beta of 0.7 currently priced at Rs 50 is expected to increase in price to Rs 55 by year end and pay Rs 1 as dividend. The expected market return is 15% and the risk free rate is 8%.

The stock is:

Overpriced, so do not buy it

Underpriced, so buy it

Properly priced so buy it

Properly Priced so do not buy it

96. Section B (2 Mark)

Which of the following statement is/are correct?

(i) only

(ii) only

Both (i) & (ii) are correct

Both (i) & (ii) are incorrect

97. 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

Borrow at the risk free rate and buy

Sell A short and buy

Sell B short and buy

Borrow at the risk free rate and buy

98. Section C (4 Mark)

Mr. Vivek Kalra deposits Rs.11,00,000 today in an investment that would pay after 6 years Rs. 1,00,000 per year for 5 years and Rs. 1,50,000 for the next 5 years.

What would be the balance in the account after the last payment is made if the ROI is 18% per annum compounded annually?

2969509

6078097

12832083

11283083

99. Section A (1 Mark)

A good customer relationship management program will allow a business to:

Retain good customers

Retain & acquire customer

Provide information to customers

Acquire customers

100. Section A (1 Mark)

An activity is presumed to be a profit-making activity rather than a hobby if the

Activity shows a profit for any three out of five years, ending with the tax year in question.

Activity shows a profit for any two out of five years, ending with the tax year in question.

Taxpayer conducts the activity with some expertise.

Taxpayer conducts the activity in a businesslike manner.

Page 11 of 38

101. Section B (2 Mark)

What is the PV of an Annuity Due which provides Rs. 2,000/- per month for first 3 years and then Rs. 3,000/- per month for next 2 years.

This annuity starts 4 years from now and ROI is 9 % per annum compounded monthly?

81234.87

66159.94

80704.76

79453.34

102. Section B (2 Mark)

The following parameters are available for two mutual funds:

Calculate Treynor’s performance index for Fund A & Fund B respectively

8, 1.66

10, 3.33

9, 2.50

18, 4.25

103. 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:

C8.657%.

7.16%

+8.657%.

None of the Above

104. Section A (1 Mark)

If a certain stock has a beta greater than 1.0, it means that

The stock's return is more volatile than that of the market portfolio.

An investor can eliminate the risk by combining it with another stock that has a negative beta.

An investor will earn a higher return on his stock than that on the market portfolio.

The stock is less risky than the market portfolio.

105. Section B (2 Mark)

There are two parties to Power of Attorney, namely, Donor and Donee.

Both (i) & (ii) are correct

Only i is correct

Only ii is correct

Both (i) & (ii) are incorrect

106. Section B (2 Mark)

Calculate the standard deviation on a portfolio from the following data

14.23

5.15

17.25

11.34

107. Section A (1 Mark)

Which of the following is true regarding the resistance level?

Resistance levels tend to develop due to profit taking.

It is the level at which a significant decrease in demand is expected.

It is the level at which a significant increase in supply is expected.

Resistance levels usually develop after a stock reaches a new low.

108. Section A (1 Mark)

The potential loss for a writer of a naked call option on a stock is

Limited

Unlimited

Larger the lower the stock price.

Equal to the call premium.

109. Section A (1 Mark)

After originally investing Rs10,000 and selling your investment for Rs 12,000, you reinvest the total amount and tell yourself that you will not be concerned if you lose Rs 2,000 in this new investment.

You are likely demonstrating which type of judgment error?

Mental accounting

House money

Regret aversion

Sunk cost fallacy

110. Section C (4 Mark)

Read the senario and answer to the question.

Harish wants a monthly investment to achieve the goal of his children's higher education. For accumulation of fund you recommend Harish to invest in an investment vehicle which invests in the ratio of 20:80 in Debt and Equity. If Harish starts investing from 1st Dec 2010, what approximate amount should he set aside every month for each child to achieve the goal? Harish maintains separate investment accounts for Chirag and Vishesh and invests till they individually turn 21 years of age.

Rs. 8,400 and Rs. 3,760 respectively

Rs. 8,100 and Rs. 3,640 respectively

Rs. 9,540 and Rs. 4,240 respectively

Rs. 7,850 and Rs. 3,950 respectively

Page 12 of 38

111. Section A (1 Mark)

_______________ consists of the constatation that people buy both insurances and lottery tickets.

Alias Paradox

St Petersburg Paradox

Cramer's Solution

he Friedman-Savage Puzzle

112. Section A (1 Mark)

The________________ deals with the double-edged enigma of why individuals like dividends (in developed country where dividends are taxable) and why this method of income distribution persists in light of quite burdensome double taxation.

Theory of Limited Arbitrage

Equity premium puzzle

Present-biased preferences

Dividend Puzzle

113. Section A (1 Mark)

Mr. Raghav is now 40 years old. He has invested some amount in an annuity which will pay him after 10 years Rs. 30,000/- p.a. at the end of every year for 10 years.

Rate of interest is 6% p.a. Calculate how much he has invested today?

123295

220803

121826

127252

114. Section A (1 Mark)

Multi period hedging is ________

A way to manage qualitative risk over time

A way to manage market risk over time

A way to manage sentimental risk over time

None of the above

115. Section C (4 Mark)

Read the senario and answer to the question.

Which of the following would affect Net Worth of Keshav?

2 and 3

3 and 4

1, 3 and 4

1, 2 and 4

116. Section C (4 Mark)

Consider the following information for three mutual funds:

Market Return 10%

Risk free return is 7%.

Calculate Jensen measure (%).

1.70, 5.30, 3.40

2.25, 3.78, 4.65

4.35, 3.78, 2.53

3.17, 4.58, 5.78

117. Section A (1 Mark)

Which of the following is not a Key Benefit of the In-kind process used by the ETFs?

Only I

Only II

Only III

None of These

118. Section C (4 Mark)

Mr. Rajesh Rawat deposits Rs. 15,000 per month at the end of the month for 6.50 years in an account that pays a ROI of 8.80% per annum compounded quarterly.

What will be the amount in the account after 6.50 years?

1571140

1567650

91666

91654

119. 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?

3.5%, 15.5%

8.8%, 7.03%

20%, 14.5%

9.8%, 15.6%

120. Section B (2 Mark)

Mr.Neeraj has a portfolio consisting of two stocks A & B has a standard deviation of 5% while stock B has a standard deviation of 15%. Stock A comprises 40% of the portfolio and stock B consists of 60%. If the correlation of returns of A and B is 0.5, the variance of return on the portfolio is_______

103

Page 13 of 38

121. Section A (1 Mark)

Following is not a head of income

Income from interest on securities

Capital Gains

Income from House Property

Salaries

122. Section B (2 Mark)

In the maturity stage of the industry life cycle

The product has reached full potential.

Profit margins are narrower.

Producers are forced to compete on price to a greater extent.

A, B, and

123. Section A (1 Mark)

Which of the following factors have proven most important in credit scoring models?

Credit Bureau ratings

Income bracket

Number of loans the customer has had

A and B only

124. Section B (2 Mark)

If one earns 10% on investment but inflation is 2%, real rate of return is

10%

7.84%

7.70%

125. Section C (4 Mark)

Sunil has an investment portfolio of Rs.100000; the initial portfolio mix is Rs.50000 in stocks, Rs.30000 bonds and Rs.20000 in bank.

If market goes up by 10% and the value of bonds decreases by 10%, what should Sunil do under the constant mix policy?

She should sell Rs.4000 of stocks, buy bonds worth Rs.3600 and deposit Rs.400 in bank

She should sell Rs.3500 of stock and buy bonds worth Rs.1500 and Deposit Rs.1000 in bank

She should buy his portfolio equally

She should sell his portfolio equally

126. Section A (1 Mark)

Which of the following is NOT a dimension of service quality?

Empathy

Assurance

Reliability

Competence

127. Section A (1 Mark)

Guarantees covering security deposit/earnest money/advance payment/ mobilization advance etc. would come under__________________ category

Financial Guarntees

Performance Guarntees

Deferred Payment Guarntees

None of the Above

128. Section B (2 Mark)

If a portfolio manager has a good ability to select undervalued securities but a poor ability to forecast overall market, the following makes sense for him:

Concentrate holdings in selected undervalued stocks and shift beta below and above the desired long-term average based on market forecasts

Hold a broadly diversified portfolio of stocks and keep beta stable at the desired long-term average

Concentrate holdings in selected undervalued stocks and keep beta stable at the desired long-term average

Hold a diversified portfolio of stocks and shift beta above and below desired long-term average based on market forecasts

129. Section A (1 Mark)

The two primary tools of a technical analyst are:

Level of the market index and volume

Economic indicators and level of the market index

Price and volume

Price and technical indicators

130. Section C (4 Mark)

Read the senario and answer to the question.

Mr. Bhaitia will continue to invest Rs. 10,000 in his PPF a/c at the beginning of each year till his retirement.

Then calculate how much he has to save extra at the end of per month in a scheme to achieve his retirement corpus with a yield of 10%?

Rs. 4507

Rs. 3714

Rs. 3745

Rs. 5567

Page 14 of 38

131. Section A (1 Mark)

Essential requirement for the person who can attest the will is that he

Must be a relative

Must be one of the beneficiaries

Must witness the testator executing the will

Must be lawyer

132. Section A (1 Mark)

Which of the following is the process of enabling personnel to deliver service in manner that is beneficial to both the organization’s customers and to itself?

Training

Recruitment

Empowerment

Accountability

133. Section B (2 Mark)

Information processing errors consist of

I and II

I and III

III and IV

I, II and III

134. Section C (4 Mark)

Read the senario and answer to the question.

Mrs. Deepika’s brother is impressed with Manav Fashion Ltd. an online clothing firm that focuses on the 18C22 age bracket. Their prices are much lower than their competitors, and the quality is high. Reading about the firm on its web site and in various financial newspapers, her brother has learned that the company plans to expand its clothing lines. The prevailing price of its share is 70 per share. Manav Fashion Ltd. has had recent annual earnings of Rs. 5 per share.

Only three other companies have very similar business to Manav Fashion Ltd. and have stock that is traded and there PE ratios are as follows:

Her brother asked Mrs. Deepika to guide him in investing the Manav Fashion Ltd. Getting the query from her brother Mrs. Deepika asks your advice on this matter.

As a Chartered Wealth Manager what will be your advice?

Invest in shares of Manav Fashion Ltd.

Not to invest in shares of Manav Fashion Ltd

Manav Fashion Ltd’s share valuation is less than prevailing price, so it is an option not to miss.

Manav Fashion Ltd’s share valuation is less than prevailing price, so it is an option not to be availed.

135. Section A (1 Mark)

Any property inherited by a female Hindu from her husband or from her father in law, in the absence of any son or daughter of the deceased shall go to…..

Heir of mother

Heir of father

Heir of Husband

Heir of Sister

136. Section B (2 Mark)

Sunil insured the building of his house for a sum of Rs.500000 against fire insurance. One day the house is totally gutted in a devastating fire. The insurance surveyors certified that the building is a total loss with no salvage value and that the insurable value of the building just prior to the loss was Rs.1000000.

The insurer will pay to Sunil:

Rs.1000000

Rs.250000

Rs.500000

Nil

137. Section B (2 Mark)

The ________________provides that where the total income of an enterprise is computed by the AO on the basis of the arm's length price as computed by him, the income of the other associated enterprise shall not be recomputed by reason of such determination of arm's length price in the case of the first mentioned enterprise, where the tax has been deducted or such tax was deductible, even if not actually deducted under the provision of chapter VIIB on the amount paid by the first enterprise to the other associate enterprise.

First proviso to section 92 C(4)

Second proviso to section 92C(4)

First proviso to section 91 C(4)

Second proviso to section 91C(4)

138. Section C (4 Mark)

Read the senario and answer to the question.

Mr. Bhatia owns a Maruti Wagonr with a monthly EMI of Rs. 6,312. The above loan will be completely repaid by August 2008. Mr. Bhatia planning to purchase a new car worth of Rs. 15 lakh. For this he has to take a full value loan of the car with 9% interest for 5 years. But his present car is in good condition and life of this car is approximately another 5 years repairs and maintenance cost are minimum. If he postpones his car purchasing plan now and deposit the same EMI outflow required for new car into an SIP with a minimum 15% yield for the next five years, then calculate the fund he can accumulate?

Rs. 23.66 lacs

Rs. 27.58 lacs

Rs. 23.49 lacs

Rs. 30.47 lacs

139. Section A (1 Mark)

Land plus anything permanently fixed on it, including building, sheds and other items attached to the structure refers to _____.

Real Estate

Real Estate investment

Property Trust

Any of the above

140. Section A (1 Mark)

During the past five years, the returns of a stock were as follows:

Calculate the expected rate of return

6.80%

7.40%

8.50%

9.23%

Page 15 of 38

141. Section B (2 Mark)

A perspective on decision making based on the assumption that people typically show risk aversion; hence, when making decisions they view whatever losses may be involved as more painful than equivalent gains are desirable. We have an irrational tendency to be less willing to gamble with profits than with losses.

Utility Theory

Attribution Theory

Prospect Theory

None of the Above

142. 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.

1.57

2.54

2.09

1.95

143. Section C (4 Mark)

Data on following mutual funds given below:

Risk free return is 8%. Calculate Treynor measure.

4.45, 6.98, 5.33

6.72, 6.26, 6.31

2.95, 8.16, 5.31

6.09, 10.53, 5.93

144. Section B (2 Mark)

Non-Resident (NR) is __________on Indian Income and ___________on Foreign Income.

Non Taxable and Taxable

Taxable and Non Taxable

Taxable and Taxable

Non Taxable and Non taxable

145. Section C (4 Mark)

Ramesh aged 50 could not save for his retirement till date but now decides to save Rs. 50000 per month till his retirement age of 65. He anticipates that the return in the first 5 years would be 13% p.a. next 5 years 10% and in the last 5 years 8% p.a. He wants to accumulate a corpus of Rs. 1.50 Crores till his retirement. Calculate the surplus or shortfall he would have on his retirement.

Surplus 40 Lacs

Shortfall 40 Lacs

Surplus 29 Lacs

Shortfall 15 Lacs

146. Section B (2 Mark)

After making an investment, assume that an investor overhears a news report that has negative implications regarding the potential outcome of the investment he has just executed.

How likely is he to then seek information, if he exhibits self attribution bias, that could confirm that you’ve made a bad decision?

Very unlikely.

Unlikely.

Likely.

Very likely.

147. Section A (1 Mark)

As per presumptive income scheme under section 44AE, the presumed income shall be:

Rs. 3,000 p.m. per goods carriage

Rs. 3,500 p.m. per heavy goods vehicle and Rs. 3,150 p.m. per vehicle other than heavy goods vehicle

Rs. 3,500 p.m. per heavy goods vehicle Rs. 3,150 p.m. for medium goods vehicle and Rs. 2,000 p.m. per light commercial vehicle.

148. Section C (4 Mark)

Suppose you have decided to sell your house and downsize by acquiring a townhouse that you have been eyeing for several years. You do not feel extreme urgency in selling your house; but the associated taxes are eating into your monthly cash flow, and you want to unload the property as soon as possible. Your real estate agent, whom you have known for many years, prices your home at Rs 90,00,000―you are shocked.

You paid Rs 250,000 for the home only 15 years ago, and the Rs 900,000 figure is almost too thrilling to believe. You place the house on the market and wait a few months, but you don’t receive any nibbles. One day, your real estate agent calls, suggesting that the two of you meet right away. When he arrives, he tells you that Pharma Growth, a company that moved into town eight years ago in conjunction with its much-publicized initial public offering (IPO), has just declared bankruptcy.

Now, 7,500 people are out of work. Your agent has been in meetings all week with his colleagues, and together they estimate that local real estate prices have taken a hit of about 10 percent across the board. Your agent tells you that you must decide the price at which you want to list your home, based on this new information. You tell him that you will think it over and get back to him shortly.

Assume your house is at the mean in terms of quality and salability.

What is your likeliest course of action if you exhibit Anchoring and Adjustment bias?

I and II

I and III

III and IV

I, II and III

149. Section B (2 Mark)

Mr. Ram buys 100 calls on a stock with a strike of Rs.1,200. He pays a premium of Rs.50/call. A month later the stock trades in the market at Rs.1,300. Upon exercise he will receive __________.

Rs. 10,000

Rs. 1,200

Rs. 6,000

Rs. 1,150

150. 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?

2.63

1.24

0.81

0.38

Page 16 of 38

151. Section A (1 Mark)

_____________ is defined as fairness in spending in US.

Efficiency

Equity

Effectiveness

All of the above are concerned with fairness in spending.

152. Section A (1 Mark)

The two major types of real estate are ____ and ___ .

Commercial, residential

Commercial, personal

Personal, residential

(a) And (b) both

153. Section B (2 Mark)

The current market price of a share of XYZ stock is Rs50. If a call option on this stock has a strike price of Rs45, the call

Is out of the money.

Is in the money.

Sells for a higher price than if the market price of XYZ stock is Rs. 40.

B and

154. 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:

410,000

3,50,000

2,85,000

3,95,000

155. Section C (4 Mark)

Read the senario and answer to the question.

If Mahesh extends his retirement age to 65, what is the annual saving required in the beginning of every year if his post retirement expenses are 85% of his pre-retirement expenses?

Rs. 3209

Rs. 35524

Rs. 42447

Rs. 21361

156. Section B (2 Mark)

In UK, which of the following types of income is not specifically exempt from income tax?

Statutory redundancy pay

Income from Individual Savings Accounts

Any benefit in kind provided to employees by an employer

Income from National Savings Certificates

157. Section A (1 Mark)

Fiscal termites are factors that threaten the integrity of tax systems, and most of which relate to the internationalization of tax.

These are:

I, II and III

III and IV

I, II and IV

All of the above

158. Section B (2 Mark)

Last year, Owen Technologies reported negative net cash flow and negative free cash flow. However, its cash on the balance sheet increased.

Which of the following could explain these changes in its cash position?

The company had a sharp increase in its depreciation and amortization expenses.

The company had a sharp increase in its inventories.

The company issued new common stock.

Statements a and b are correct.

159. Section A (1 Mark)

With regard to hedge funds, ‘2 and 20’ is best explained as:

2 year lock-up and 20 per cent commission

2 per cent annual fee and 20 per cent performance fee

2 per cent commission and 20 month lock-up

2 per cent performance fee and $20m high-water mark

160. 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?

2.34

1.67

2.97

1.39

Page 17 of 38

161. Section B (2 Mark)

Financial Year 2012-13 shall be considered as

Assessment Year for the previous year 2011-12 and previous year for the assessment year 2013-14

Previous year for the assessment year 2011-12

Assessment Year for the previous year 2011-12 and previous year for the assessment year 2012-13

Assessment Year for the previous year 2011-12

162. Section A (1 Mark)

The steps to establishing an investment policy are to state the Pass Your Certification With Marks4sure Guarantee

Minimum investment and maximum fees.

Regulatory guidelines for prudent man investing.

Objectives and constraints and preferences.

Asset allocation parameters and time horizons.

163. Section C (4 Mark)

Zoya Ltd has the following Balance sheet for FY 2005-2006:

The Total Sales for the year was Rs. 6,00,000.

The company president believes the company carries excess inventory. Accordingly he wants the inventory turnover ratio to be 8x and would use the freed up cash to reduce current liabilities.

If the company follows the president’s recommendation and sales remain the same, the new quick ratio would be:

2.4

4.5

1.2

164. Section C (4 Mark)

Zenith Finance is a big financial firm which owns several mutual funds. The funds are managed individually by portfolio managers but it has an investment committee that oversees all of the funds. This committee is responsible for evaluating the performance of the funds relative to the appropriate benchmark and relative to stated investment objectives of each individual fund. During a recent investment committee meeting, the poor performance of its Equity Funds were discussed. In particular, the inability of the portfolio managers to outperform their benchmarks was highlighted. The net conclusion of the committee was to review the performance of the manager responsible for each fund and dismiss those managers whose performance had lagged substantially behind the appropriate benchmark.

The fund with the worst relative performance is the Zenith Large Cap Fund which invests in large cap stocks.

A review of the operations of the fund found the following:

• The turnover of the fund was almost double that of other similar style mutual funds

• The fund’s portfolio manager solicited input from her entire staff prior to making any decision to sell an existing holding

• The beta of the Zenith Large Cap Fund’s portfolio was 65% higher than the beta of other similar style mutual funds

• The portfolio manager refuses to increase the Capital Goods sector weighting because of past losses the fund incurred in the sector

• The portfolio manager sold all the fund’s Oil Marketing Companies stocks as the price per barrel of oil rose above $105. He expects oil prices to fall back to the $80 to $85 per barrel

• No stock is considered for purchase in the Large Cap Fund unless the portfolio manager has 10 years of financial information on that company.

A committee member made the following 2 comments:

Comment 1: “One reason for the poor performance of Large Cap Mutual Fund is that the portfolio lacks recognizable companies. I believe that good companies make good investments

Comment 2: “The portfolio manager of the Large Cap Fund refuses to acknowledge his mistakes. He seems to sell stocks that appreciate, but she holds stocks that have declined in value

The two behavioral biases exhibited respectively in the above 2 comments from the committee are:

Gambler’s fallacy & Hindsight bias

Regret minimization & Conservatism

Money illusion & Mental accounting

Representativeness Bias & Loss aversion Bias

165. Section A (1 Mark)

Operational customer relationship management supports which of the following function?

Front Office

Customer campaigns

Effective interaction

Data mining

166. Section A (1 Mark)

A cognitive heuristic in which people tend to reach conclusions based on the 'framework' within which a situation is presented; e.g. people are more lokely to recommend the use of a new procedure if it is described as having a '50% success rate' than a '50% failure rate'.

Which of the following is most likely consistent with this bias?

Anchoring and Adjustment Bias

Framing Bias

Confirmation bias

Overconfidence Bias

167. Section A (1 Mark)

Which ONE of the following in not the requirement for managing customer?

Need and want of customers

Measurement of most or least profitability of customer or product

Measurement of least growth potential of product or customer

Knowing which customers will be advocates and supporters

168. Section A (1 Mark)

In US which of the following is classified as passive income?

Bonus income

Gain on the sale of real estate

Interest income

Income from a limited partnership

169. Section A (1 Mark)

Which one of the following statements is/are true?

Real Estate investment is illiquid.

Agricultural land is exempt from wealth tax.

Agricultural land is exempt from capital gain tax but however subject to land revenue.

All of the above

170. Section B (2 Mark)

As a result of a lawsuit, Catherine was awarded $300,000 for compensatory damages and $400,000 for punitive damages.

What is the taxable income resulting from this suit?

$300,000

$400,000

$700,000

Page 18 of 38

171. Section A (1 Mark)

Which one of the following statements is false?

There is a liquid secondary market trading in private equity investments

Private equity is sometimes accused of taking short-term measures to enhance a company’s salability at the expense of its long-term prospects

A company may use private equity finance to repurchase its shares and return from public to private status

A businessman can use angel networks to source funding capital

172. Section A (1 Mark)

Mr. Sharma is aged 50 years at present. He has invested some amount in an annuity which will pay him after 10 years Rs. 25,000/- p.a. at the beginning of every year for 10 years.

Rate of interest is 6% p.a. Calculate how much amount he has invested now?

107981.1

106543.34

107349.56

108910.6

173. Section A (1 Mark)

The disposition effect relates to the fact that:

Investors tend to overconfident regarding potential stock prices.

Investors often experience regrets about trading decisions.

Investors are more likely to sell winners than losers.

Investors tend to dispose of stocks at the end of the year.

174. Section B (2 Mark)

How much should you pay for a share of stock that offers a constant growth rate of 10%, requires a 16% rate of return, and is expected to sell for Rs50 one year from now?

Rs. 42.00

Rs. 45.00

Rs. 45.45

Rs. 47.00

175. Section A (1 Mark)

Which of the following types of income is received by individuals without deduction of basic rate tax?

Loan interest paid by UK companies

Building society interest

Patent royalties

Bank interest received on a National Savings bank account

176. Section B (2 Mark)

You may need to file your Returns in India under the following circumstances:

I, II and III

II and III

III and IV

All of the above

177. Section A (1 Mark)

The __________ is NOT a market anomaly.

size effect

January effect

earnings announcement anomaly

accounting changes effect

178. Section B (2 Mark)

A bond has a market value of Rs100,000 and a duration of 9.42.

What is the price value of a basis point?

Rs 94.20

Rs 9.42

Rs 942

Rs 9420

179. Section A (1 Mark)

Which of the following is a special human trait that we need to sharpen and use very often in CRM?

Forecast

Foresee

Foresee and Forecast

None of the above

180. Section A (1 Mark)

Real estate property consists of:

Residential properties

Commercial properties

Speculative properties

All of the above

Page 19 of 38

181. Section B (2 Mark)

Calculate the value at which an office building can be priced from the following information:

A similar building has 8% capitalization rates.

Rs. 23,95,500

Rs. 23,00,000

Rs. 24,13,500

Rs. 22,12,000

182. Section A (1 Mark)

The best way to maintain your credit rating is to:

Use credit sparingly.

Pay cash for your purchases.

Repay your debts on time.

Declare a bankruptcy.

183. Section A (1 Mark)

Technical Analysis of security valuation includes ………..

Timing the market

Analyzing demand and supply of stock

Comparing book value and market value

A and B Both

184. Section B (2 Mark)

The______________ recognizes the commercial reality that even when a transfer pricing adjustment is made under that sub-section the amount represented by the adjustment would not actually have been received in India or would have actually gone out of the country.

First proviso to section 92 C(4)

Second proviso to section 92C(4)

First proviso to section 91 C(4)

Second proviso to section 91C(4)

185. Section B (2 Mark)

Shiva Industries Ltd. earns Rs. 2 per share and distributes 40% of its earnings as cash dividends. Its dividends grew annually at 7%.

What will be the stock’s price if the required rate is 10%?

Rs. 31.25

Rs. 29.50

Rs. 28.53

Rs. 21.40

186. Section A (1 Mark)

A firm has a higher asset turnover ratio than the industry average, which implies

The firm has a higher P/E ratio than other firms in the industry.

The firm is more likely to avoid insolvency in the short run than other firms in the industry.

The firm is more profitable than other firms in the industry.

The firm is utilizing assets more efficiently than other firms in the industry.

187. Section B (2 Mark)

How much total interest is paid between the 5th and 11th payments inclusive on a loan that has monthly payments for 2 years and an original principal of Rs47 500? The loan rate is 6.6% compounded quarterly.

Rs. 1311.87

Rs. 1156.18

Rs. 13 509.39

Rs. 1093.02

188. Section B (2 Mark)

In the year to 31 March 2012, a UK resident company made a UK trading profit of £800,000 and received net overseas income of £26,000 (net of 20% withholding tax). These were the company's only sources of income. The company also paid a qualifying charitable donation of £5,000.

For double tax relief purposes, the charitable donation will be allocated as a deduction from the company's overseas income.

True or False?

TRUE

FALSE

189. Section A (1 Mark)

Which of the Following needs to register as an' Investment Adviser' as per SEBI Investment Advisor Regulations 2013.

Any person who gives general advice on trends in the market and does not specify a particular security or investment.

Any Insurance Agent who advises on Insurance Products and is registered by IRDA

Any person providing Investment Advice to Clients exclusively outside India

Any person who for consideration is engaged in the business of providing “investment advice” to clients in India

190. Section A (1 Mark)

Income received in India in previous year is taxable in the hands of:

Resident;

Non-Resident;

Non ordinarily resident;

All above.

Page 20 of 38

191. Section A (1 Mark)

Which of following is not an exclusion under a health policy?

Pre existing conditions

Accident injury

Elective surgery

Intentional self inflicted injury

192. Section B (2 Mark)

Which of the following statement is/are correct?

(i) only

(ii) only

Both (i) & (ii) are correct

Both (i) & (ii) are incorrect

193. Section A (1 Mark)

Accumulation, preservation and distribution are stages of

Financial Life cycle

Human Life Cycle

Human Life Value

All of the above

194. Section B (2 Mark)

Which one of the following statements is/are correct?

(i) only

(ii) only

Both are correct

Both are incorrect

195. Section B (2 Mark)

Profitability Index is

Present value of future cash flows / present value of initial investment

Present value of future cash flows / future value of initial investment

Future value of cash flows / present value of initial investment

None of the above

196. Section C (4 Mark)

Roger deposits Rs. 10,00,000 in a bank account on 1st March 2005 and another Rs. 5,00,000 on 1st March 2011. He wants to withdraw all of this money with interest on 1st March 2015.

If the account pays ROI of 11% p.a. compounded quarterly what amount can he withdraw from this account?

2959874

771755

3731629

3598455

197. Section A (1 Mark)

AUM stands for

Asset Utilization Model

Asset Under Management

Area Under Management

None of the above

198. Section C (4 Mark)

Read the senario and answer to the question.

If Mr. Mehta is paying interest rate 12%p.a on his housing loan and 10% p.a. on car loans, in how many months would he pay off his housing loan and car loan?

House loan-321 month, Car Loan-129 months

House loan-540 month, Car Loan-318 months

House loan-342 month, Car Loan-249 months

House loan-432 month, Car Loan-429 months

199. 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:

Wholly in India

Wholly or partly in India

Partly in India

Wholly outside India

200. Section B (2 Mark)

Which of the following Biases are exhibited by Independent Individualist?

I and II

III and IV

I and III

All of the Above

Page 21 of 38

201. Section A (1 Mark)

Income of Rs. 300000 is received in Sri Lanka by a resident of India. But later on Rs. 50000 is remitted to India

Rs. 350000 will be taxable

It will not be taxable

Rs. 50000 will be taxable

Rs. 300000 will be taxable

202. Section A (1 Mark)

When deciding under uncertainty, which of the following generally accepted guidelines that a decision maker should follow:

III and IV

II and V

I and III

None of the Above

203. Section A (1 Mark)

Which of the following is/are the challenges of Private Banking?

I, II and III

I,III and IV

I, II and IV

All of Them

204. Section B (2 Mark)

If after the partition of an HUF 2 members became partners in 3 firms on behalf of their respective HUFs and they also become partners in a fourth firm. The funds were obtained by means of loans from the other 3 firms. The share incomes of the members from the fourth firm were assessable as their individual income only.

TRUE

FALSE

205. Section A (1 Mark)

__________ is a tangible company asset that can (and should) be inventoried and managed.

Geographical information

Customer information

Product information

All of the given options

206. 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?

Rs 3,30,000

Rs 3,45,500

Rs 2,50,000

Rs 2,75,000

207. Section A (1 Mark)

Which of the following is an advantage of a credit scoring model?

Credit scoring models rely on the evaluation of an experienced credit officer

Credit scoring models are immune from charges of discrimination

Credit scoring models never make mistakes

Credit scoring models can handle a large volume of applications in a short period of time

208. Section B (2 Mark)

The term “permanent establishment” includes especially:

I, II and III

II and III

III and IV

All of the Above

209. Section A (1 Mark)

Commodity exchanges enable producers and consumer to hedge their _______ given the uncertainty of the future.

Seasonal risk

Profit risk

Production risk

Price risk

210. Section A (1 Mark)

If an investor searches for patterns in security returns by examining various techniques applied to a set of data, this is known as:

Fundamental analysis.

Technical analysis.

Data mining.

Random-walk theory.

Page 22 of 38

211. Section A (1 Mark)

The price that the writer of a put option receives for the underlying asset if the option is exercised is called the

Strike price

Exercise price

execution price

None of the above

212. Section C (4 Mark)

Suppose Nifty is at 4450 on 27th April. An investor, Mr. A enters a long straddle by buying 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 3729

• If Nifty closes at 5214

457 and -547

343 and 580

-107 and 547

564 and 507

213. Section A (1 Mark)

_______________ and _______________ mandates are two kinds of service level contracts

Advisory, Discretionary

Discretionary, Managed

Advisory, Managed

None of the above

214. Section A (1 Mark)

The premise of behavioral finance is that

Conventional financial theory ignores how real people make decisions and that people make a difference.

Conventional financial theory considers how emotional people make decisions but the market is driven by rational utility maximizing investors.

Conventional financial theory should ignore how the average person makes decisions because the market is driven by investors that are much more sophisticated than the average person.

B and C

215. Section A (1 Mark)

First step in developing a Wealth Management Plan is

Identify goals and objectives

Identify and clarify the current situation

Analyze problems and solutions

Implementation of solutions

216. Section A (1 Mark)

In a life insurance contract, offer refers to

Proposer paying the first premium

Proposer’s application form for insurance

Original policy bond

Company brochure duly authenticated

217. Section B (2 Mark)

As per article 12 Double Taxation Avoidance Agreement with Singapore, Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed__________ per cent.

218. Section B (2 Mark)

The Wilson Corporation has the following relationships:

What is Wilson’s profit margin and debt ratio?

2%; 0.33

4%; 0.33

4%; 0.67

2%; 0.67

219. Section A (1 Mark)

Financial Gerontology tries to assess client needs based on __________

Demographics of middle aged children and their elderly parents

Interconnections of financial legal and ethical issues

Options for financing health and long term care

All of the above

220. Section C (4 Mark)

Read the senario and answer to the question.

For the purpose of World Tour Nimita has an option to use her investments in PPF A/c. She would contribute maximum permissible amount on the 1st working day of April every year till its due maturity as well as in all years of the extension of account for a 5-year term after its due maturity. She wants to use half of the PPF account proceeds for the proposed world tour. You estimate the adequacy of such amount, the same is _____________.

Short by Rs. 44,200

In excess by Rs. 1,05,400

Short by Rs. 44,200

In excess by Rs. 52260

Page 23 of 38

221. Section A (1 Mark)

The principle of _____________ ensures that an insured does not profit by insuring with multiple insurers

Subrogation

Contribution

Co-insurance

Indemnity

222. Section C (4 Mark)

You own 3 scripts with their market value at Calculate the CAGR of portfolio.

10.26%

1.64%

11.16%

223. Section A (1 Mark)

Short-term cash flow improvement may not be achieved by

Reducing inventories

Reducing trade payables

Reducing trade receivables

Increasing trade payables

224. Section B (2 Mark)

Mr. A gifted debenture of Rs. 100000 to his wife. She received Rs. 10000 interest which she reinvests and earns Rs. 1000. This Rs. 1000 will be taxable in the hands of

Mr. A or Mrs. A, at the choice of the Assessing Officer

Mr. A

Mrs. A

Not Taxable

225. Section B (2 Mark)

As per Double Taxation Avoidance Agreement, the Technical Fees in UK is charged at:

22.5

Nil

226. Section A (1 Mark)

Which of the following measures is lowest for a currently callable bond?

Macaulay duration.

Effective duration.

Modified duration.

None of the Above

227. Section A (1 Mark)

The core of the_________________ is that even though stocks appear to be an attractive asset C they have high average returns and a low covariance with consumption growth C investors appear very unwilling to hold them.

Sunk Cost Fallacy

Equity premium puzzle

Present-biased preferences

Inter Temporal Consumption

228. Section C (4 Mark)

Arvind Ltd. currently EPS is Rs.5. Its return on equity (ROE) is 25% and it retains 60% of its earning. Stocks of similar risk are priced to return 18%.

What is the intrinsic value of Arvind Ltd’s Stock?

Rs. 76.67

Rs. 72.36

Rs. 74.45

Rs. 73.25

229. Section B (2 Mark)

Which of the following two outcomes is an example of Status Quo Bias:

Both of the above

None of the above

230. Section B (2 Mark)

In order to determine the residential status of an NRI returning to India for permanent settlement, for the year of return, besides the stay not exceeding 181 days an additional condition is applicable that of stay not totalling to____________ days or more in relevant year if his stay in earlier ___________ years totaled to 365 days or more.

90 and 3

60 and 4

180 and 5

180 and 3

Page 24 of 38

231. Section B (2 Mark)

Mr. Gupta has got his stock insured against fire for Rs5,00,000/-, during the year he lost the stock in his ware house for Rs. 4,00,000/-. The surveyor from insurance company gave his report that at the time of fire the stock in the ware house had value 6,00,000/-

Calculate what amount Mr. Gupta will receive from the insurance company.

4,00,000/-

5,00,000/-

3,33,333/-

None of the above

232. Section B (2 Mark)

Mrs. Sharma, a 40-year-old widow, has an 8-year-old son. Her current savings are not adequate to provide for her son’s post graduate studies, however she will be able to save for it by the time he finishes graduation i.e. when he is 20 years old. Mortality tables indicate that her life expectancy is another 30 years.

Which one of the following is true?

She needs to insure her life for 12 years

She does not need to insure her life

She needs to insure her life for 30 years

She needs to insure her son’s life for 30 years

233. Section B (2 Mark)

Which of the Following are the Negative Effects of Sample-Size neglect for investors

Both of the above

Neither of the above

234. Section A (1 Mark)

During “Teen age years” life stage, typical asset allocation should be

25% equities, rest in fixed income instruments

50% equities, rest in fixed income instruments

75% equities, rest in fixed income instruments

None of the above

235. Section B (2 Mark)

____________ are good examples of the limits to arbitrage because they show that the law of one price is violated.

II, III and IV

I, III, and IV

I, III, and V

II, IV and V

236. Section A (1 Mark)

Anurag has invested Rs. 10 lakh. in a pension fund that pays an interest rate of 12% p.a. compounded quarterly. If Anurag wants to withdraw money after 25 years every month for next 20 years what amount can he withdraw.

220034

230972

210034

200021

237. Section B (2 Mark)

Encashment of leave during service tenure is

Taxable

Tax free

Taxable only if more than the notified exemption

Tax free up to 50% of the notified amount

238. Section A (1 Mark)

The critical variable in the determination of the success of the active portfolio is ________.

Alpha/systematic risk

Alpha/nonsystematic risk

Gamma/systematic risk

Gamma/nonsystematic risk

239. Section A (1 Mark)

You have added more money to a losing stock twice, despite no good news about the stock.

You are likely demonstrating which type of judgment error?

Mental accounting

House money effect

Regret aversion

Sunk cost fallacy

240. Section A (1 Mark)

A bank is considering making a loan to Jitesh Desai. Jitesh is a commissioned sales broker. Some months he earns as much as Rs 1,00,000 and in other months he earns virtually nothing.

Which aspect of evaluating a consumer loan would this be concerned with?

Character and purpose

Income level

Deposit balance

Employment and residential stability

Page 25 of 38

241. Section B (2 Mark)

Which of the following statements is/are correct with respect for Resident Senior Citizen i.e. who is of an age of 60 years and above, but below 80 years?

I and II

I and IV

Only III

All of the above

242. Section B (2 Mark)

An employee joined in the year 2000 in a sugar mill. After working all the years as a seasonal employee up to the year 2011. He retires with the following monthly salary

How much gratuity is payable to him?

Rs 11308

Rs 9692

Rs 8885

Rs 20769

243. Section A (1 Mark)

When two banks simply agree to exchange a portion of their customers' loan repayments, they are using:

A credit option

A standby letter of credit

A credit linked note

A credit swap.

244. Section C (4 Mark)

Mr. Dinesh constructs a BULL Call Spread Strategy with one Nifty Call Option having a Strike price of Rs. 4100 available at a premium of Rs. 170.45 and another Nifty Call option with a strike price Rs. 4400 at a premium of Rs. 35.40.

The Net Payoff of BULL Call Spread Strategy

• If Nifty closes at 4300

• If Nifty closes at 3700

72.05 and -125.05

64.95 and -135.05

-115.05 and 84.95

-65.05 and 0

245. Section C (4 Mark)

Amit an industrialist wants to buy a flat in a housing society presently costing Rs. 35,00,000/- after 6 years. The cost of the house is expected to increase by 15% p.a for the first 3 years and by 10% in the remaining years. Amit wants to start a SIP with monthly contributions in Birla Front Line Equity Mutual Fund to pay for the down payment of the house which would be 25% of the house value at that time. You as a CWM expect that the fund would give ROI of 14% p.a. compounded monthly in the next 10 years. Please advise Amit the monthly SIP amount starting at the beginning of every month for the next 6 years to fulfill his goal of buying the Flat he desires.

63422.72

65185.55

16537.56

15883.32

246. Section C (4 Mark)

Suppose Nifty is at 4500 in May. An investor, Mr. A, executes a Long Strangle by buying 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 4232

• If Nifty closes at 5241

2 and 475

120 and -431

91 and 145

45 and 51

247. Section A (1 Mark)

Which of the following is/are correct?

Both A and B statements are true

Statement A is true

Statement B is true

Both A and B are not true

248. Section B (2 Mark)

An investor expects the price of a stock to double after eight years.

What is the expected annual rate of growth?

9.05%

None of the above

249. Section A (1 Mark)

Holistic advisory services which cater to specific client segments such as entrepreneurs, professionals are known as____________________.

Universal Banks

Family Office

Global Investment Banks

Wealth management Specialists

250. Section A (1 Mark)

Which of the following income is not exempt under section 10-IT Act 1961?

Share in total income of firm

Bonus on life insurance

Income from mutual funds

Income from agriculture in Lahore

Page 26 of 38

251. Section C (4 Mark)

Which of the following statements are correct?

I and II

I and III

III and IV

All of the Above

252. Section C (4 Mark)

As a CWM you are required to calculate the tax liability of an individual whose Taxable income is:

• $ 178650 in US dollars and he is a US citizen (single individual)

• $ 85300 in SGD and he is a citizen of Singapore

27450.10 USD and 14780 SGD

28460.50 USD and 15680 SGD

24580.50 USD and 16100 SGD

43482.50 USD and 11942 SGD

253. Section A (1 Mark)

The assessed is charged to income-tax in the assessment year following the previous year:

A non-resident business firm which shipped goods on 1.5.210 at Visakhapatnam Port in Andhra Pradesh

An employee left India to USA on 1.8.2010 with no intention of returning

ABC firm which discontinued its business on 1.9.2010

An employee-assessed of a University who worked during 1.4.09 to 30.03.2010

254. Section B (2 Mark)

Manav wishes to have a retirement corpus of Rs. 2,50,000/- in 30 years’ time.

Assuming that he can earn a ROI of 12 % per annum, what amount he should invest yearly into a fund to reach his goal?

1,035.91

1054.43

1098.34

2100

255. Section A (1 Mark)

A principal weakness of the Dow Theory is:

Its use of averages instead of indexes.

Its attention to general market movements

That it pays too much attention to primary trends.

The many versions that are available.

256. Section A (1 Mark)

Dividend received by a shareholder from an Indian company the whole of whose income is agricultural income shall be treated as:

agricultural income in the hands of shareholder and thus exempt

agricultural income and thus exempt but it will be subject to partial integration

exempt under section 10(34) but taxable in the hands of the company

income taxable under the head income from other sources

257. Section A (1 Mark)

A put option on a stock is said to be out of the money if

The exercise price is higher than the stock price.

The exercise price is less than the stock price.

The exercise price is equal to the stock price.

The price of the put is higher than the price of the call.

258. Section A (1 Mark)

From the following data calculate the expected rate of return of a portfolio in which A and B has weights equally:

259. Section B (2 Mark)

As per Double Taxation Avoidance Agreement, the Royalties in UAE is charged at:

22.5

Nil

260. Section A (1 Mark)

Debt ratio is

Current Cash / Current liabilities

Current Assets / Current liabilities

Current Liabilities / Current assets

Total Liabilities / Net Worth

Page 27 of 38

261. Section B (2 Mark)

Which of the following Biases are exhibited by Passive Preserver?

I and II

III and IV

I and III

All of the Above

262. Section A (1 Mark)

A call option on a stock is said to be in the money if

The exercise price is higher than the stock price.

The exercise price is less than the stock price.

The exercise price is equal to the stock price.

The price of the put is higher than the price of the call.

263. Section A (1 Mark)

A type of trust in which assets are passed down to the grantors grandchildren not the grantors children

Private. trust

Discretionary trust

Dynasty trust

Express trust

264. Section A (1 Mark)

Hybrid plans are

Combination of DB & ESOP plan

Combination of DB & DC plan

Combination of ESOP and Money purchase plan

None of the above

265. Section B (2 Mark)

Which of the following statements is/are true?

I, II and III

I, II and IV

I, III and IV

II, III and IV

266. Section C (4 Mark)

Which of the following statements is/are correct?

I and II

I, II and IV

III and IV

All of the Above

267. Section A (1 Mark)

Conventional theories presume that investors ____________ and behavioral finance presumes that they ____________.

Are irrational; are irrational”

Are rational; may not be rational”

May not be rational; may not be rational

May not be rational; are rational”

268. Section A (1 Mark)

Surender is a driver who causes injuries to a pedestrian by his rash driving.

The injured victim had to spend Rs.1000 in treating his injuries. Surender ‘s act has created liabilities under:

Common law

Contract

Statue and Common law

Statute only

269. Section A (1 Mark)

If the deceased has two widows, four sons and two daughters then what is the share of each widow

One seventh of estate

One half of estate

One eighth portion

One fourteenth portion

270. Section A (1 Mark)

These people are so well balanced, they cannot be placed in any specific quadrant, so they fall near the center.

The Celebrity

The Straight Arrow

The Guardian

The Adventurer

Page 28 of 38

271. Section B (2 Mark)

____________compares the price charged for property or services transferred in a controlled transaction to the price charged for property or services transferred in a comparable uncontrolled transaction in comparable circumstances

Comparable Uncontrolled Price Method [CUP]

Resale Price Method [RPM]

Cost-Plus Method [CPM]

Profit Split Method [PSM]

272. Section C (4 Mark)

Yogesh Jain is a Chartered Accountant by profession and a very disciplined investor he has started investing from today in an account Rs. 1,00,000 every year (beginning of year) and plans to increase his contribution by 10% every year. If the ROI he gets is 15% per annum compounded half yearly calculate the corpus he would be able to accumulate in 25 years.

47379847

52117831

48763660

44330600

273. Section B (2 Mark)

Mahesh wants to sell a property for Rs. 30 lakhs. He is earning rent from tenant Rs.

3,60,000. He is spending following amounts annually on that property.

Based on the above information what should be the value of the property would be:

32,25,714.29

31,94,570.43

35,91,765.19

41,53,210.21

274. Section A (1 Mark)

Which of the following is an investment analysis approach to determine real estate values?

The cost approach

The net present value approach

The comparative sales approach

The income approach

275. Section A (1 Mark)

The effect on a bond portfolio’s value of a decrease in yield would be most accurately estimated by using:

The full valuation approach.

The price value of a basis point.

Both the portfolio’s duration and convexity.

None of the Above

276. Section B (2 Mark)

A person is treated as being UK resident for a tax year if he or she is physically present in the UK for at least ___ days in the year or makes regular visits to the UK averaging at least ___ days per year. Fill in the blanks.

183, 91

91, 183

182, 90

90, 182

277. Section B (2 Mark)

The lesson from the credit crisis of 2007-2009 is that securitized assets and credit swaps are:

Complex financial instruments

Difficult to correctly value and measure in terms of risk exposure

Possible to set in motion a financial contagion that cannot be easily stopped without active government intervention

All of the above are correct

278. Section C (4 Mark)

The following parameters are available for four mutual funds:

Calculate Treynor’s performance index for each of the funds on the assumption that r=6% where r stands for the risk C free interest rate.

6, 2.5, 1.43, 0

7, 2.5, 2.43, 4

5, 2.5, 1.43, 5

6, 2.5, 1.43, 2

279. Section A (1 Mark)

Psychologists have found that people who make decisions that turn out badly blame themselves more when that decision was unconventional. The name for this phenomenon is

Regret avoidance

Framing

Mental accounting

Overconfidence

280. Section A (1 Mark)

An equity analyst working for a growth oriented mutual fund has a tendency to misvalue the stocks of popular companies that she has previously recommended and the fund already owns.

Her behavior is most likely consistent with which of the following biases?

Escalation bias

Prospect theory

Confirmation bias

None of These

Page 29 of 38

281. Section A (1 Mark)

Companies can build interest and enthusiasm by using databases to remember customer preferences.

This strategy helps to which of the following?

Identify prospects

Avoid serious customer mistakes

Reactivate dormant customers

Deepen customer loyalty

282. Section A (1 Mark)

Mansi has deposited Rs. 7,00,000/- in a bank today @ ROI of 10 % per annum compounded monthly.

She wants to know that if she withdraws this money in monthly installments at the END of the month for 7 years, then how much will be the each installment amount?

10788.23

13012.23

11,620.82

12012.23

283. Section B (2 Mark)

Select the CORRECT statement regarding basis risk associated with futures.

Basis risk can be completely eliminated.

Although the basis fluctuates over time, it can be precisely predicted.

The basis must be zero on the maturity date of the contract.

A hedge will reduce risk as long as basis fluctuations are positive.

284. Section A (1 Mark)

Following is/ are the component(s) of Personal Financial Statements

Cash Flow Statement

Income Statement

Balance Sheet

All of the above

285. Section A (1 Mark)

Individuals define risk as:

Deviation from some expected return.

A cost of investing.

A quantitative measure.

“Losing money.”

286. Section A (1 Mark)

The concept of designing marketing communication programs that coordinate all promotional activities to provide a consistent message across all audiences is called

Direct marketing

The marketing mix

Relationship marketing

Integrated marketing communication

287. Section A (1 Mark)

Which of the following is not a broad category of Alpha drivers?

Bulk Beta

Cheap Beta

Long/Short Investing

Concentrated Portfolios

288. Section A (1 Mark)

______________ is based on a particular (theoretical) lottery game that leads to a random variable with infinite expected value, i.e., infinite expected payoff, but would nevertheless be considered to be worth only a very small amount of money.

Alias Paradox

St. Petersburg Paradox

Cramer's Solution

The Friedman-Savage Puzzle

289. Section B (2 Mark)

Miss Femina aged 17, is married to Mr. Masculine. Her mother alone is alive income by way of interest on loans, of Miss Femina will be:-

Assessed to tax in the hands of her mother

Exempt from tax

Taxable in her own hands

Assessed to tax in the hands of Mr. Musciline

290. Section B (2 Mark)

An employee benefit plan can generally help in accomplishing all of the following items except:

Meet a need that cannot otherwise be met (such as providing for the cost of a serious illness)

Provide unique tax benefits (such as funding a qualified retirement plan without current taxation of the plan contributions to the employee)

Eliminate underwriting requirements on any personally purchased life insurance

Encourage the employee to remain with the employer

Page 30 of 38

291. Section A (1 Mark)

________ bias means that investors are too slow in updating their beliefs in response to evidence.

Framing

Regret avoidance

Overconfidence

Conservatism

292. Section A (1 Mark)

To take care of the risks during the foreign travel, Overseas Travel Insurance policy cover provides various other covers, in addition to __________ insurance, such as baggage cover, loss of transport cover, personal accident cover, personal legal liability cover etc.

Medical

Health

Life

Property

293. Section A (1 Mark)

Convertible bond arbitrage is to event driven as _________ is to corporate restructuring.

Market neutral

Short selling

Distressed securities

Market timers

294. Section A (1 Mark)

_____________is a percentage of the original or proposed loan to the value of a property.

The Loan-To-Value (LTV) ratio

Point

Chattel Mortgages

None of the Above

295. Section B (2 Mark)

An Indian citizen leaving India during the previous year for employment purpose is said to be resident If:

He is in India for a period of 60 days or more during the previous year and for 365 or more days during 4 previous years immediately preceding the relevant previous year

He is in India in the previous year for a period of 182 days or more

He is not considered as a resident

He has a house in India

296. Section B (2 Mark)

Which of the following statements is/ are correct?

I, II and III

III and IV

II and IV

All of the above

297. Section A (1 Mark)

The covariance of market’s returns and stock returns is 0.005. The standard deviation of market’s return is 5%.

What is the stock’s beta?

0.1

1.5

298. Section B (2 Mark)

Securities and Exchange Board of India (SEBI) performs three major functions to meet its objectives these are:

I, II, IV

I, II, III

II, III, IV

I, III, IV

299. Section C (4 Mark)

Read the senario and answer to the question.

Mr. Saxena is planning to visit USA for the very first time in his carrier to promote software of his company and is expected to stay long. He wants to plan his journey in such a manner so that he can get maximum tax benefits in the FY 2007C08 from the residential status point of view.

What is the latest date when he can afford to leave India & earn status of an NRI to get maximum tax benefits in assessment year 2008C09?

On 12-10-2007

On 28-09-2007

On 01-10-2007

On 22-09-2007

300. Section B (2 Mark)

The arbitrage pricing theory (APT) and the CAPM both assume all except which of the following?

Investors have homogeneous beliefs.

Investors are risk-averse utility maximizers.

Borrowing and lending can be done at the rate R

Markets are perfect.

Page 31 of 38

301. Section A (1 Mark)

Short-term to medium-term loans repayable in two or more consecutive payments are known as:

Non installment loans

Installment loans

Residential mortgage loans

Nonresidential cash loans

302. Section B (2 Mark)

In US which form tells your employer all they need to know about your tax-related allowance information?

W-2

W-4

W-10

W-7

303. Section C (4 Mark)

Rate of 15% p.a compounded annually will be equal to ---------------- % per month.

1.25% per month

1.7149% per month

1.17149% per month

1.117% per month

304. Section A (1 Mark)

____________is the reasonably probable and legal use of vacant land or an improved property that is physically possible, legally permissible, appropriately supported, financially feasible, and that results in the highest value.

Lease / Tenancy Agreement

Will

High and Best Use of Property

Family Settlement

305. 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?

Representativeness Bias

Status Quo Bias

Availability Bias

Confirmation Bias

306. Section A (1 Mark)

In a life insurance contract, offer refers to

Proposer paying the first premium

Proposer’s application form for insurance

Original policy bond

Company brochure duly authenticated

307. Section A (1 Mark)

In which of the following is the loss unlimited?

Long call

Long put

Short call

Short put and Short call

308. 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?

Rs. 15,000

Rs. 12,000

Rs. 7,500

Nil

309. Section A (1 Mark)

If the proposer does not disclose fully all the material facts at the time of Proposal the principle violated

Caveat emptor

Insurable interest

Utmost good faith

Sharing of risk

310. Section B (2 Mark)

NRIs are granted a special benefit by way of an option of being taxed at concessional tax rate of ________ as regards "investment income" and _______ as regards "long term capital gains" arising from "specified assets.

20% and 10%

15% and20%

12% and 10%

10% and 15%

Page 32 of 38

311. Section B (2 Mark)

Risk to bondholders comes from

I and II

I and III

II and III

All of the above

312. Section C (4 Mark)

You know the following concerning a common stock:

If you want to earn 10 percent, should you buy this stock? What is the maximum price you should be willing to pay for the stock?

Should Buy, Maximum price Rs. 30

Should not buy, Maximum price Rs. 19.88

Should buy Maximum Price Rs. Rs. 60.27

Should not buy, Maximum price Rs. 22.66

313. Section B (2 Mark)

Retiring early will ____________ the accumulation phase while ____________ the retirement phase

Longer, shorter

Shorter, longer

Longer, longer

Shorter, shorter

314. Section A (1 Mark)

Credit cards are the best example of a _____________ that offer consumers convenience and flexibility.

Revolving credit.

A box of credit.

Convenience credit.

Installment credit.

315. Section A (1 Mark)

A(n)_______________ is a credit-rating agency that keeps records of borrowers' loan payment histories.

Credit Agreement

Credit Monitoring authority

Credit Bureau

Central Bank

316. Section B (2 Mark)

When returns to an investor’s portfolio increase, to what does he believe the change in performance is mainly due (if the investor exhibits self attribution bias)?

His investment skill.

A combination of investment skill and luck.

Luck.

None of the above

317. Section A (1 Mark)

Bank Overdraft loan is an example of:

Unsecured Loan

Secured Loan

318. Section C (4 Mark)

As a CWM you are required to calculate the tax liability of an individual whose taxable income is:

• $321500 in SGD and he is a Singapore citizen

• £ 35214p.a (only dividends) and he is a UK citizen

£ 6715.80 and 2843.50 SGD

£ 13431.60 and 6906.25 SGD

£ 26863.20 and 11375 SGD

£ 11444.55 and 64300 SGD

319. Section A (1 Mark)

An example of a highly cyclical industry is ________.

The automobile industry

The tobacco industry

The food industry

A and B

320. Section A (1 Mark)

The Base Year for BSE Realty index is____________

2005

2006

2004

2007

Page 33 of 38

321. Section B (2 Mark)

If the commodity’s futures price declines

I and III

I and IV

II and III

II and IV

322. Section A (1 Mark)

Mortgage loans:

Are used to purchase real estate.

Are primarily long term.

Usually have more than half the balance remaining when the loan is half-way to maturity.

All of the above.

323. Section B (2 Mark)

If a stock GHI ltd pays an annual dividend of Rs. 5 and plans to follow this policy for ever, then what would be the ate of return that investor would realize given the current market price of stock is 100?

20%

80%

10%

324. 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?

26.75

26.5

27.59

35.15

325. 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 Dividends are:

326. Section C (4 Mark)

Dinex Ltd, a leader in the development and manufacture of electronic devices, reported earnings per share of Rs 2.02 in 2003, and paid no dividends. These earnings are expected to grow 14% a year for five years (2004 to 2008) and 7% a year after that. The firm reported depreciation of Rs 2 million in 2003 and capital spending of Rs 4.20 million, and had 7 million shares outstanding. The working capital is expected to remain at 50% of revenues, which were Rs 106 million in 2003, and are expected to grow 6% a year from 2004 to 2008 and 4% a year after that. The firm is expected to finance 10% of its capital expenditures and working capital needs with debt. Dinex Ltd had a beta of 1.20 in 2003, and this beta is expected to drop to 1.10 after 2008. The current risk free rate is 7%.

Estimate the value per share today, based upon the FCFE model.

36.5

35.05

37.5

40.5

327. Section B (2 Mark)

If a portfolio manager has a good ability to forecast overall market but a poor ability to select undervalued securities, the following strategy would suit best to him.

Concentrate holdings in selected undervalued stocks and shift beta below and above the desired long-term average based on market forecasts

Hold a broadly diversified portfolio of stocks and keep beta stable at the desired long-term average

Concentrate holdings in selected undervalued stocks and keep beta stable at the desired long-term average

Hold a diversified portfolio of stocks and shift beta above and below desired long-term average based on market forecasts

328. Section C (4 Mark)

Mudra Financial is a large financial firm which owns several mutual funds. The funds are managed individually by portfolio managers but it has an investment committee that overseas all of the funds. This committee is responsible for evaluating the performance of the funds relative to the appropriate benchmark and relative to stated investment objectives of each individual fund. During a recent investment committee meeting, the poor performance of Its Equity Funds were discussed. In particular, the inability of the portfolio managers to outperform their benchmarks was highlighted. The net conclusion of the committee was to review the performance of the manager responsible for each fund and dismiss those managers whose performance had lagged substantially behind the appropriate benchmark.

The fund with the worst relative performance is the Mudra Large Cap Fund which invests in large cap stocks.

A review of the operations of the fund found the following:

• The turnover of the fund was almost double that of other similar style mutual funds

• The fund’s portfolio manager solicited input from her entire staff prior to making any decision to sell an existing holding

• The beta of the Mudra Large Cap Fund’s portfolio was 65% higher than the beta of other similar style mutual funds

• The portfolio manager refuses to increase the Capital Goods sector weighting because of past losses the fund incurred in the sector

• The portfolio manager sold all the fund’s Oil Marketing Companies stocks as the price per barrel of oil rose above $105. He expects oil prices to fall back to the $80 to $85 per barrel

• No stock is considered for purchase in the Large Cap Fund unless the portfolio manager has 10 years of financial information on that company.

The underweighting of the Capital Goods sector and selling off Oil Marketing Stocks could be best described as an example of:

Conservatism and Regret Minimization respectively

Regret Minimization and Gambler Fallacy respectively

Loss Aversion and Representativeness respectively

Anchoring & Adjustment and Money Illusion respectively

329. 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?

11.40%

12.90%

10.50%

13.50%

330. 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?

2114431

1364431

4615995

4333264

Page 34 of 38

331. Section B (2 Mark)

You are given the following set of data on security ABC:

Calculate the expected return on security ABC?

0.12

0.15

0.13

0.14

332. Section B (2 Mark)

Investors will choose investments that resonate with their own personality or that have characteristics that investors can relate to their own behavior. Taking the opposite view, investors ignore potentially good investments because they can’t relate to or do not come in contact with characteristics of those investments. For example, thrifty people may not relate to expensive stocks (high price/earnings multiples) and potentially miss out on the benefits of owning these stocks.

Which of the following Availability Bias have been exhibited in the case above?

Retrievability.

Categorization.

Resonance.

Narrow range of experience.

333. Section B (2 Mark)

The ____________ provides an unequivocal statement on the expected return-beta relationship for all assets, whereas the _____________ implies that this relationship holds for all but perhaps a small number of securities.

APT, CAPM

APT, OPM

CAPM, APT

CAPM, OPM

334. Section A (1 Mark)

Which of the following is true regarding credit card loans?

There is evidence that considerable economies of scale exist

Credit cards cannot act as installment loans

Credit cards are very inflexible for consumers

All of the above are true

335. Section C (4 Mark)

Read the senario and answer to the question.

Neeraj’s portfolio consist shares of company X Ltd. which is paying a dividend of Rs. 2 per share. The dividend is expected to grow @15% annual rate for 3 years, then @10% for the next 3 years, after which it is expected to grow @5% forever.

What among the following would be your advice to Neeraj in case the market value of the share is Rs. 85? Assume capitalization rate to be 9% per annum

Keep the share as the market price is higher than the current value of the share.

Sell the share as the market price is lower than the current value of the share

Buy more shares as market price is lower than current value

Sell the shares as the market price is higher than the current value of the shares

336. 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.

Rs 47.49

Rs 57.36

Rs 35.51

Rs 64.75

337. Section B (2 Mark)

Mr. Jain is projecting an income stream providing Rs. 2,000/- for first 3 months, Rs. 3,200 for next 2 months, Rs. 4,500 for next 1 month, Rs. 3,700 for next 6 months and Rs. 800 for 2 months thereafter. EACH CASH FLOW starts from the beginning of the month.

Please calculate the Present Value of this cash stream if rate of interest is 9 % per annum compounded monthly?

38818.17

36713.23

39129.34

34123.65

338. Section B (2 Mark)

Which of the following statements is correct?

Acquiring customers is on tenth the cost of retaining customers

Retaining customers is same as the cost of acquiring new customers

Retaining customers is on fifth the cost of acquiring new customers

Retaining customers is on tenth the cost of acquiring new customers

339. Section A (1 Mark)

The most common type of interest rate swap is

The plain vanilla swap.

The basic swap.

The swaption.

The notional swap.

340. Section A (1 Mark)

Under which of the categories of asset you would put Real Estate in:

Growth asset

Income asset

Defensive asset

Safe haven asset

Page 35 of 38

341. 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

-105 and 76

145and -73

212 and -143

-43 and 207

342. Section C (4 Mark)

Pizer Drugs, a large drugstore chain, had sales per share of Rs122 in 1993, on which it reported earnings per share of Rs2.45 and paid a dividend per share of Rs1.12. The company is expected to grow 6% in the long term, and has a beta of 0.90. The current Risk Free Rate is 7%.

Estimate the appropriate Price for Pizer Drug and what would the profit margin need to be to justify the price per share if the stock is currently trading for Rs34 per share, assuming the growth rate is estimated correctly,

Rs20.18 and 4.12%

Rs 21.05 and 5.25%

Rs 19.87 and 3.42%

Rs 18.54 and 3.75%

343. Section B (2 Mark)

Which one of the above statements is/are incorrect?

(i) only

(ii) only

Both

None of the above

344. Section A (1 Mark)

Real estate investments can be categorized into:

Outright Ownership

Leveraged equity position

Mortgages

All of the above

345. Section B (2 Mark)

Which of the following statements with respect to DTAA is/are correct?

I, II and III

I and IV

II, III and IV

All of the Above

346. Section B (2 Mark)

A bank plans to offer new subordinated notes in the open market next month but knows that its credit rating is being reviewed by a credit rating agency. The bank wants to avoid paying sharply higher credit costs.

Which type of credit derivative contract would you most recommend for this situation?

Credit linked note

Credit option

Credit risk option

Total return swap

347. Section C (4 Mark)

Navin Corporation, a manufacturer of do-it-yourself hardware and housewares, reported earnings per share of Rs2.10 in 1993, on which it paid dividends per share of Rs0.69.

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 is 6.25%.

What is the value of the stock, using the two-stage dividend discount model?

Rs27.59

Rs 30.06

Rs 25.15

Rs 27.75

348. Section A (1 Mark)

Monetary policy is determined by

Government budget decisions.

Presidential mandates.

The board of Governors of the Central Bank

None of the Above

349. Section A (1 Mark)

Deduction under section 80RRB is allowed to the extent of:

50% of royalty or Rs. 3,00,000 whichever is less

100% of royalty or Rs. 3,00,000 whichever is less

100% of royalty or Rs. 2,00,000 whichever is less

100% royalty or Rs. 5,00,000 whichever is less

350. Section A (1 Mark)

The January effect concerns:

Large Cap Stocks.

Mid-Cap Stocks.

Small Cap Stocks.

Foreign Stocks.

Page 36 of 38

351. Section C (4 Mark)

Read the senario and answer to the question.

Vinay wants to have 80% of the desired retirement corpus from his monthly savings from now itself. If he expects to earn 12% p.a. on these savings, how much amount should the couple save at the end of each month to achieve this target?

Rs. 26422

Rs. 36548

Rs. 17873

None of the above

352. 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?

362190

371298

383721

396454

353. Section A (1 Mark)

A covered call position is equivalent to a

Long put.

Short put.

Long straddle.

Vertical spread.

354. Section B (2 Mark)

Markets would be inefficient if irrational investors __________ and actions of arbitragers were __________.

Existed; unlimited

Did not exist; unlimited

Existed; limited

Did not exist; limited

355. Section B (2 Mark)

Choose the amount of final tax liability of R for the assessment year 2007-08:

17100

17442

15700

16014

356. Section B (2 Mark)

Ramesh has invested Rs 3,000/- in Reliance Growth Fund two years ago and its worth is now 4,000/-. Ram has received dividend Rs.300 at the end of two years. Calculate Compounded annual growth rate (CAGR) of Ram’s investment.

19.58%

11.95%

0.11%

1.19%

357. Section A (1 Mark)

Which of the following is NOT the general purpose of CRM?

Purpose of CRM is better managing their customers through the introduction of reliable systems and methods.

Purpose of CRM is enable organizations to service their existing customers more emphatically and more forcefully

Purpose of CRM is not developing processes and procedures for interacting new customers.

All of above given options

358. Section A (1 Mark)

REIT Preferred Stock can offer lower total returns than common stock and have some liquidity issues as well.

TRUE

FALSE

359. Section A (1 Mark)

____________ may be responsible for the prevalence of active versus passive investments management.

Forecasting errors

Overconfidence

Mental accounting

Conservatism

360. Section A (1 Mark)

The following is exempt income:

Travel concession to employee

Remuneration received for valuation of answer scripts

Encashment of leave salary whilst in service

Perquisites in India

Page 37 of 38

361. Section B (2 Mark)

Lokesh purchased a flat on 1-4-1996 for Rs. 10,00,000/-. He sells the same flat on 1-10-2006 for Rs. 25,00,000/-.As a CWM® calculate the Indexed Cost of Acquisition on which capital gain would be calculated. (The CII of year 1995-96 is 281, for year 1996-97 is 305, for year 2005-06 is 497 and for year 2006-07 is 519).

17,01,639

18,46,975

17,68,683

16,29,508

362. Section A (1 Mark)

Which of the following is an assumption of the CMT?

Single investors can affect the market by their buying and selling decisions.

There is no inflation.

Investors prefer capital gains over dividends.

Different investors have different probability distributions.

363. Section B (2 Mark)

As Per Article 11 Double Taxation Avoidance Agreement with UK, a dividend paid by a company which is a resident of the United Kingdom to a resident of India may be taxed in India. Where under paragraph 2 of this Article, a resident of India is entitled to a tax credit in respect of that dividend, tax may also, be charged in the United Kingdom and according to the laws of the United Kingdom on the aggregate of the amount or value of the dividend and the amount of the tax credit, at a rate not exceeding ___________ percent.

364. Section B (2 Mark)

In 2011-12, Steven has business profits of £34,125, net bank interest of £1,240 and net dividends of £9,000. He claims the personal allowance of £7,475.

What is the income tax payable for the year after subtracting tax deducted at source?

£7,360

£6,050

£8,280

£6,290

365. Section A (1 Mark)

The____________________ in commercial real estate requires that the tenant pay a significant share of expenses of operation, as well as all taxes and insurance related to their rental unit.

Triple net lease

The Gross Lease

The Modified Net Lease

None of the Above

366. Section A (1 Mark)

A type of lease where there is no payment schedule and penalty for a set period of lines.

True lease

Sub lease

Operating lease

Skip lease

367. Section B (2 Mark)

How much total principal is repaid between the 1st and 17th payment interval of a 4.5-year loan for Rs 4567 at an interest rate of 7.44% compounded monthly. The payments are also monthly.

Rs. 1297.33

Rs. 1277.06

Rs. 1205.60

Rs. 1465.01

368. Section A (1 Mark)

A(n) _________________________ guarantees the swap parties a specific rate of return on their credit asset. Bank A may agree to pay the total return on the loan to Bank B plus any appreciation in the market value of the loan. In return Bank A will often get LIBOR plus a fixed spread plus any depreciation in the value of the loan.

credit option

Total return Swap

credit linked note

credit swap

369. Section A (1 Mark)

Strategic asset allocation involves

Market timing.

Simulation to identify a range of outcomes for various asset mixes.

The life-cycle concept.

Individual investors only.

370. Section C (4 Mark)

Mr. XYZ is bearish about Nifty and expects it to fall. He sells a Call option with a strike price of Rs. 2600 at a premium of Rs. 154, when the current Nifty is at 2694. If the Nifty stays at 2600 or below, the Call option will not be exercised by the buyer of the Call and Mr. XYZ can retain the entire premium of Rs.154.

What would be the Net Payoff of the Strategy?

• If Nifty closes at 2900

• If Nifty closes at 2400

-146 and -46

202 and 154

-146 and 154

-46 and 4

Page 38 of 38

371. Section A (1 Mark)

The steps to establishing an investment policy are to state the

Minimum investment and maximum fees.

SEBI guidelines for prudent man investing.

Objectives and constraints and preferences.

Asset allocation parameters and time horizons.

372. Section C (4 Mark)

In the year to 31 March 2012, a UK resident company receives overseas income of £9,000 (net) from which 10% tax has been deducted at source. The company's only other income is a UK trading profit of £80,000. There are no associated companies.

What is the UK corporation tax liability for the year?

£18,000

£17,000

£16,000

£15,000

373. Section C (4 Mark)

Read the senario and answer to the question.

Mahesh’s company has made plans for the next year. It is estimated that the company will employ total assets of Rs. 1000 lakh: 50% of the assets being financed by borrowed capital at an interest cost of 8% per year. The direct costs are estimated at Rs. 500 lakh. All other operating expenses are estimated at Rs. 76 lakh. The good will be sold to customer at 140% of the direct costs. Income tax rate is assumed to be 30%. Calculate net profit margin and return on owners’ equity.

8.4% & 11.78%

9.4% & 8.88%

8.4% & 6.88%

6.4% & 8.88%

374. Section A (1 Mark)

The use of P/E ratios to select stocks suggests that

High P/E stocks should be purchased

Low P/E ratio stocks are overvalued

A stock should be purchased if it is selling near its historic low P/E

A stock should be purchased if it is selling near its historic high P/E

375. Section A (1 Mark)

Gift received is not taxable in hands of

Individual

HUF

Society

None of the above

376. Section A (1 Mark)

The two components of EPS are

ROA and leverage.

Book value per share and leverage.

ROE and book value per share.

Leverage and profit margin.

CWM_LEVEL_2 Chartered Wealth Manager (CWM) Certification Level II Examination Questions

CWM_LEVEL_2 Chartered Wealth Manager (CWM) Certification Level II Examination Questions

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