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

Section B (2 Mark)

Which of the following are the two skills associated with being a good listener?

Section B (2 Mark)

A project should be considered if the Profitability Index is

Section A (1 Mark)

Operational customer relationship management supports which of the following function?

Section C (4 Mark)

A stock ABC Ltd. is trading at Rs. 450. Mr. XYZ is bullish on the stock. But does not want to invest Rs. 450. He does a Long Combo. He sells a Put option with a strike price Rs. 400 at a premium of Rs. 1.00 and buys a Call Option with a strike price of Rs. 500 at a premium of Rs. 2.

What would be the Net Payoff of the Strategy?

• If ABC Ltd closes at 625

• If ABC Ltd closes at 328

Section B (2 Mark)

What are the two strategies that have the broadest mandate across financial, commodity, and futures markets?

Section B (2 Mark)

R acquired shares of G Ltd, on 15/12/1998 for Rs. 5 lakh which were sold on 15/5/2011 for Rs. 18.50 lakh. Expenses of transfer were Rs. 20,000/-. He invests Rs. 6 lakh in the bonds of NHAI on 16/10/2011. Compute the capital gain for the assessment year 2012-13.

Section B (2 Mark)

Which of the following statements is/are False?

Section A (1 Mark)

_____________ is defined as fairness in spending in US.

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 __________.

Section A (1 Mark)

A rapidly growing GDP indicates a(n) ______ economy with ______ opportunity for a firm to increase sales.

Section A (1 Mark)

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

Section A (1 Mark)

An appealing feature of options on futures contracts is that:

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?

Section B (2 Mark)

Ram is working in Rashid Enterprises, a proprietorship firm.During his working hours Ram was injured seriously. Due to this injury Ram was hospitalized for six months. Ram is the only bread winner of his family. Ms. Rashid, the proprietor of Rashid Enterprises is liable to pay damages to Ram. Under which of the following policy Rashid can protect himself from this liability?

Section A (1 Mark)

An agreement entered into between the owner of the vacate land and the builder/ developer is known ____________.

Section A (1 Mark)

Conflict of interest should be discussed in ________

Section C (4 Mark)

What is the portfolios standard deviation if you put 25% of your money into stock A which has a standard deviation of 15% and rest into stocks B which has a standard deviation of 10%. The correlation coefficient between the returns of the stocks is .75.

Section C (4 Mark)

Read the senario and answer to the question.

Saxena is considering an attractive investment proposal in which he is being offered two different cash flow choices at the same initial investment of Rs. 2,00,000. According to you which one should he opt for assuming Risk Free Interest Rate is the required rate of return?

Section A (1 Mark)

Deduction under section 80C shall be allowed:

Section C (4 Mark)

Puspinder Singh Ahluwalia took a housing loan on 1st. of June 2009 (EMI in arrear) of Rs. 50 lacs at a ROI of 10.75% p.a. compounded monthly for 12 years. He wants to know the deduction in taxable income he can claim u/s 24 of the IT act for the FY 2011 -12

Section A (1 Mark)

A type of CRM Dominant characteristic which applies technology across organizational boundaries with a view to optimizing company, partner and customer value is known as_______________.

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.

Section A (1 Mark)

What are the common methods an investors may use to value real estate investments?

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.

Section B (2 Mark)

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

Section A (1 Mark)

The length of the insurance industry’s business cycle is shortened because of

Section B (2 Mark)

Which of the following statements is/are correct with respect to Resident Very Senior Citizen i.e. who is of an age of 80 years and above?

Section C (4 Mark)

Read the senario and answer to the question.

Keshav purchased a Health Insurance. The policy has a calendar-year deductible of Rs. 500 and 80:20 as coinsurance. Keshav was hospitalized with a covered illness on January 23rd 2009. This hospitalization was his first claim under the said policy for the calendar year. His covered medical expenses were Rs. 20,500. How much of this amount will the insurer pay and how much will Keshav be required to pay to the Hospital?

Section A (1 Mark)

Real estate property consists of:

Section C (4 Mark)

The current dividend on an equity share of Bharat Limited is Rs.8.00 on earnings per share of Rs. 30.00. Assume that the dividend per share will grow at the rate of 20 percent per year for the next 5 years. Thereafter, the growth rate is expected to fall and stabilize at 12 percent. Investors require a return of 15 percent from Bharat’s equity shares. What is the intrinsic value of Bharat’s equity share?

Section A (1 Mark)

Mr. Sharma invested Rs. 2,00,000 in an investment that gives Rs 40,000/- for the first 4 years, and Rs. 60,000/- for next 3 years. If the discount rate is 12 %, calculate the Present Value of these cash flows?

Section B (2 Mark)

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

Section C (4 Mark)

Read the senario and answer to the question.

Ms. Deepika is interested in investments in foreign markets. Her brother is working in one of reputed American company in India and that is offering him some shares under ESOP scheme. This company is not listed in India. It is listed in New York Stock Exchange. Ms. Deepika is asking her manager how this transaction will took place for her brother?

Section A (1 Mark)

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

Section A (1 Mark)

What is the Present Value of an annuity which pays Rs. 10,000/- for 3 years at the END of each year, assuming ROI @ 7% per annum compounded annually?

Section B (2 Mark)

Payback period is

Section A (1 Mark)

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

Section B (2 Mark)

The Net Worth Required for an Individual is _________________ for a Partnership Firm is ____________________ and Body Corporate is______________ to fulfil the Capital Adequacy requirements under the SEBI Investment Advisor Regulations 2013.

Section C (4 Mark)

Read the senario and answer to the question.

Nimita purchased 500 shares of ABC Ltd., a listed company at Rs. 45 per share on Sep. 15,2002. The company offered to buy back its shares on June 15, 2009 which Nimita accepted at a price of Rs. 75 per share on Jul 1, 2009. What is the tax liability in the hands of Nimita for this transaction for Assessment Year 2010-11? Cost inflation indices are 2002-03: 447 and 2009-10 632. (Ignore Education Cess)

Section A (1 Mark)

Supporting customers through the process of selecting, purchasing, and maintaining a product or service is known as:

Section A (1 Mark)

In “Teenage Years” life stage, one learns about ___________

Section A (1 Mark)

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

Section A (1 Mark)

A “Family Office” segment client has investible assets worth of

Section C (4 Mark)

Mr. XYZ sells a Nifty Put option with a strike price of Rs. 4000 at a premium of Rs. 21.45 and buys a further OTM Nifty Put option with a strike price Rs. 3800 at a premium of Rs. 3.00 when the current Nifty is at 4191.10, with both options expiring on 31st July.

What would be the Net Payoff of the Strategy?

• If Nifty closes at 3287

• If Nifty closes at 4925

Section C (4 Mark)

Mr. XYZ is bullish about ABC Ltd stock. He buys ABC Ltd. at current market price of Rs. 4000 on 4th July. To protect against fall in the price of ABC Ltd. (his risk), he buys an ABC Ltd. Put option with a strike price Rs. 3900 (OTM) at a premium of Rs. 143.80 expiring on 31st July.

What would be the Net Payoff of the Strategy?

• If ABC Ltd closes at 3458

• If ABC Ltd closes at 4352

Section A (1 Mark)

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

Section A (1 Mark)

EMH frequently include, among others, assumptions such as:

Section B (2 Mark)

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

Section B (2 Mark)

As per article 11 Double Taxation Avoidance Agreement with UAE, Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. However, such interest may be taxed in the Contracting State in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest, the tax so charged shall not exceed:

(a) _______ percent of the gross amount of the interest if such interest is paid on a loan granted by a bank carrying on a bona fide banking business or by a similar financial institution; and

(b) _______ percent of the gross amount of the interest in all other cases.

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

Section C (4 Mark)

Suppose Gaurav, an investor, is looking to add to his portfolio and hears about a potential investment through a friend, Hitesh, at a local coffee shop. The conversation goes something like this:

GAURAV: Hi, Hitesh. My portfolio is really suffering right now. I could use a good long-term investment. Any ideas?

HITESH: Well, Gaurav, did you hear about the new IPO [initial public offering] pharmaceutical company called Pharma Growth (PG) that came out last week? PG is a hot new company that should be a great investment. Its president and CEO was a mover and shaker at an Internet company that did great during the tech boom, and she has Pharma Growth growing by leaps and bounds.

GAURAV: No, I didn’t hear about it. Tell me more.

HITESH: Well, the company markets a generic drug sold over the Internet for people with a stomach condition that millions of people have. PG offers online advice on digestion and stomach health, and several Wall Street firms have issued “buy” ratings on the stock.

GAURAV: Wow, sounds like a great investment!

HITESH: Well, I bought some. I think it could do great.

GAURAV: I’ll buy some, too.

Gaurav proceeds to pull out his cell phone, call his broker, and place an order for 100 shares of PG.

Which of the following biases have been exhibited by Gaurav?

Section A (1 Mark)

Student loan is an example of:

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.

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?

Section A (1 Mark)

_____________ is the transfer of the balance of an existing home loan that you availed at a higher rate of interest (ROI) to either the same HFC or another HFC at the current ROI a lower rate of interest.

Section A (1 Mark)

Mr. Roy is now 45 years old. He has invested Rs. 1,75,000/- in an annuity which will pay him after 10 years a certain amount p.a. at the end of every year for 10 years. Rate of interest is 7% p.a. compounded annually Calculate how much he will receive at the end of every year after 10 years?

Section C (4 Mark)

Azhar aged 30 is a disciplined investor. He has started depositing Rs. 25,000 every year in an account that pays a return of 9% every year. He plans to increase his contribution by Rs. 5000 every year till his age 50. Calculate the amount he would be having in his account at this age.

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?

Section A (1 Mark)

A bank is considering making a loan to Sumit Nayyar. Mr. Sumit has Rs 1,00,000 in the bank right now but generally keeps a balance of Rs 4,50,000 most of the year. What aspect of evaluating a consumer loan application is this fact concerned with?

Section A (1 Mark)

Wealth Erosion can happen due to _______

Section B (2 Mark)

The employer had purchased a car for Rs. 3,00,000 which was being used for official purposes. After 2 year 6 months of its use, the car is sold to R, the employee, for Rs. 1,20,000. The value of this perquisite shall be

Section B (2 Mark)

Which of the above statements is/are correct?

Section A (1 Mark)

NSSO stands for ____________

Section B (2 Mark)

Which of the following statements is / are correct?

Section C (4 Mark)

Which of the following statements is/are correct?

Section B (2 Mark)

Total income for assessment year 2012-13 of an individual including long-term capital gain of Rs. 60,000/- is Rs. 1,80,000/-. The tax on total income shall be: [CII-12-13: 852,11-12: 785,10-11:711]

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?

Section A (1 Mark)

All the following real estate investors will acquire an income property except those who invest in

Section A (1 Mark)

In the start-up stage of the industry life cycle

Section B (2 Mark)

What is the expected percentage price change for a bond with an effective duration of nine in response to an increase in yield of 30 basis points?

Section A (1 Mark)

Deduction under section 80QQB is allowed in respect of royalty income to:

Section A (1 Mark)

Mr. Rajesh was the owner of an uninsured property. But unfortunately the property caught fire because of which he suffered severe financial losses. The reason Mr. Rajesh suffered losses as he did not cover:

Section A (1 Mark)

Which one of the following definitions of hedge fund strategies is not correct?

Section C (4 Mark)

Read the senario and answer to the question.

Sajan and Jennifer want to accumulate funds for their vacation expenses as per their determined goal. They want to invest a fixed amount immediately from the Bonus amount he has received, and then in the beginning of every financial year till April, 2020 in a separate scheme of an Equity Mutual Fund. He would withdraw the required amount annually as adjusted for inflation from the Scheme from April, 2021 till April, 2036 for undertaking vacation trips. What approximate amount should be invested every year to achieve this goal?

Section A (1 Mark)

Wages for the purpose of gratuity payment as per the Act means

Section A (1 Mark)

In a life insurance contract, offer refers to

Section A (1 Mark)

A muslim gentleman can leave his will, bequeathing all his properties to someone often than his legal heirs to the extent of…………….

Section A (1 Mark)

Which of the following is/are correct?

Section A (1 Mark)

Which of the following services are related to the field of Real Estate?

Section B (2 Mark)

Vikash has following portfolio with related details given below:

Calculate the portfolio beta?

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:

Section A (1 Mark)

Which of the following statement is not true?

Section B (2 Mark)

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

Section A (1 Mark)

The investors who buy the debt of troubled companies including subordinated debt, junk bonds, bank loans, and obligations to suppliers are called__________

Section A (1 Mark)

Which of the following statement is/are true?

Section C (4 Mark)

Mr. Mahesh Chabaria, aged 52 years, currently owns an transport firm. His family consists of his wife Nitika, also aged 52 years, son Manish aged 29 and daughter Nidhi aged 27. Nitika is a housewife and both the children are happily married and well settled. The couple anticipates their life expectancy to be 80 years each.

Income and Expenses:

The gross annual income of Mahesh for the previous year 2007-08 is expected to be Rs. 1000000. The couples’ household expenses are estimated to be Rs. 32000 per month. Taking into account incidental expenses of another Rs. 5000 the net expenses of the family are estimated to be Rs. 37000 per month for the previous year 2007-08. Mahesh has a net saving of Rs. 1800000 which he would like to invest for his post retirement purposes.

Assets Allocation:

Mahesh has hardly 8 years left for retirement and thus he is not very aggressive in his investments. Returns of his portfolio based on asset allocation during the accumulation and distribution phase are calculated as below:

Assumptions:

Section A (1 Mark)

In US How many states do not have a personal income tax?

Section B (2 Mark)

Reliable ltd. has current earnings per share of Rs. 5. Assume a dividend – payout ratio of 50 percent. Earnings grow at a rate of 9 percent per year. If the required rate of return is 14 percent, what is its current value?

Section A (1 Mark)

Which of the following is allowed as deduction from net annual value of a property?

Section A (1 Mark)

The best way to maintain your credit rating is to:

Section A (1 Mark)

REITs offer all of these, except:

Section C (4 Mark)

Read the senario and answer to the question.

During identification of new business opportunities, one of Harish’s friends Shekhar has offered him a business proposal. In this proposal a partnership firm consisting of two partners, Harish and Shekhar, shall take the franchise of a company which is a reputed brand in the field of pathology lab in which their investment and profit sharing ratio shall be equal.

Franchise rights shall be valid for 5 years and the project requires an upfront investment of Rs. 25 lakh for required infrastructure. The franchisee agreement has an option that the company can take over the franchisee after 5 years by charging depreciation @15% p.a. on straight line basis.

The projected profits from the firm are as follows:

Harish wants to know what IRR he will earn on his investment from this project ? (Please ignore taxes and assuming no additional investment is made during this five year period)

Section A (1 Mark)

Which one of the above statements is/are not a important needs of clients in the context of relationship management:

Section B (2 Mark)

Ms. Shalini Bhargav plans to purchase a property having a projected annual income for three year is Rs 20,000 with 12 percent expected return and expect to sell it at the end of three years for Rs 2,70,000. Compute the present value of the property.

Section C (4 Mark)

The assumptions concerning the shape of utility functions of investors differ between conventional theory and prospect theory. Conventional theory assumes that utility functions are __________ whereas prospect theory assumes that utility functions are __________.

Section A (1 Mark)

All but one of the following are advantages of exchange-traded funds:

Section A (1 Mark)

Employees Provident Fund is applicable to firms employing over _______________ employees

Section A (1 Mark)

For any given stock, which of the following must be true?

Section A (1 Mark)

After the satisfaction of insured’s claim from the insurer, the insured should pursue in the recovering of rights from the 3rd party.

Section A (1 Mark)

Which part of the wealth management planning deals with efficient and optimum use of credit for the business.?

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:

Section C (4 Mark)

Read the senario and answer to the question.

Which one of the following statements most accurately describes the risk exposure of the Shankers’ portfolio?

Section A (1 Mark)

Which of the following is NOT one of the phases of the life-cycle theory of asset allocation?

Section A (1 Mark)

Which of the following types of Beta has come into existence because of the growth of ETF market?

Section C (4 Mark)

Mr. Raman Gehlot, aged 55 years, is owner of midsized business firm. His family consists of his wife Anupama, aged 55, son Nishant aged 29 and daughter Nivedita aged 27. His wife is a housewife and social worker. Both of their children are happily married and well settled. The couple anticipates their life expectancy to be 75 years each.

The gross annual income of Raman for the previous year 2010–11 is expected to be Rs. 9,60,000. The couples’ household expenses are estimated to be Rs. 4,90,000 p.a. Taking into account incidental expenses of another Rs. 85,000 the net expenses of the family are estimated to be Rs. 5,75,000 for the previous year 2010–11. Thus they achieved a net surplus of Rs. 3,85,000 during the year. Raman has a net saving of Rs. 12,00,000 which he would like to invest for his post retirement purposes at the beginning of the year.

Currently Raman has approximately 5 years left for retirement and thus he is not very aggressive in his investments. The returns of his portfolio based on asset allocation during the accumulation and distribution phase are calculated as below:

Section 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.

Section A (1 Mark)

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

Section A (1 Mark)

The small-firm-in-January effect refers to the phenomenon that portfolios of small-firm stocks (compared to portfolios of large-firm stocks) have:

Section B (2 Mark)

A dealer sold one January Nifty futures contract for Rs.250,000 on 15th January. Each Nifty futures contract is for delivery of 50 Nifties. On 25th January, the index closed at 5100. How much profit/loss did he make ?

Section C (4 Mark)

Sajan Mathews, aged 29 years (as on 2nd April, 2010), is working with a Multi National Company since December 2004. He has approached you, a CWM® for preparing his wealth plan. He is staying in his own house at Ahmedabad. His wife Jennifer, aged 31 years, is a fashion designer. She has earned a net profit of Rs. 4 lakh in FY 2008-09. They have a son, Mark of age 4 years (born on 12.02.2006), and a daughter, Stephanie (born on of 23.09.2009). Sajan is also supporting his parents staying in their own house at Surat to whom he sends Rs. 10,000 p.m. His monthly house hold expenses are Rs. 30000 p.m. (excludes his investments, payment of premia and EMIs). Sajan normally gets 5% increase in his gross salary year-on-year in the beginning of every financial year, apart from bonus. The effect for this year is yet to take place, though he has received a bonus of Rs. 3,31,680 for the year 2009-10. He has taken a family floater policy for health insurance involving an annual premium of Rs. 16268 and a total cover of Rs. 15 lakh.

Current Assets & Liabilities of the Family (As on 31st March, 2010 unless otherwise specified in foot notes)

____________

1. Purchased on 25th October, 2006, annual premium paid Rs. 14,798

2. Purchased on Mark’s 2nd birthday for a term of 15 years; annual premium Rs. 41,374

3. Subscribed on 01.09.2008 @ 10% p.a., with interest credited quarterly to his savings account; renewed at same rate for one year on 01.09.2009 without penal provision for premature withdrawal

4. Home loan of Rs. 17 lakh taken on 1st November, 2004 at a fixed interest of 7.5% p.a. for a 15 year term.

5. Car loan of Rs. 4.50 lakh taken on 1st April, 2008 at a fixed interest of 11.25% p.a. for a 4-year term.

Goals:

1. To provide for higher education of Mark and Stephanie. Initial expenses at their respective age of 18 years, Rs. 3 lakh (current cost), and subsequently Rs. 2 lakh p.a. for the next two years, and Rs. 3.5 lakh p.a. for the following 2 years.

2. Marriage expenses of Rs. 15 lakh (current cost) for each child at their respective age of 27 years.

3. Retirement corpus at the age of 58 years to sustain 70% of pre-retirement household expenses till his lifetime and 50% till stephanie’s expected life.

4. A Bigger house valued at Rs. 50 lakh today, a year from now.

5. To build a separate fund for vacation expenses of Rs. 2 lakh (at current cost) every year 10 years from now so that the corpus so built is self-sustaining till the marriage of Stephanie.

Assumptions:

Section A (1 Mark)

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

Section C (4 Mark)

Saurabh contributes Rs. 10,000 every year starting from the end of the 5th year from today till the end of 12th year in the account that gives a ROI of 7.75% p.a. compounded half yearly. Calculate the Present Value of his contribution today.

Section A (1 Mark)

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

Section B (2 Mark)

According to the put-call parity theorem, the value of a European put option on a non-dividend paying stock is equal to:

Section B (2 Mark)

The price of Sunder Ltd. is currently Rs. 40. The dividend next year is expected to be Rs. 4. Required return on the stock is 12%. Find the expected growth rate under the constant growth model.

Section C (4 Mark)

Consider a three-month futures contract on gold. The fixed charge is Rs.310 per deposit and the variable storage costs are Rs.52.5 per week. Assume that the storage costs are paid at the time of deposit. Assume further that the spot gold price is Rs.15000 per 10 grams and the risk-free rate is 7% per annum. What would the price of three month gold futures if the delivery unit is one kg? Assume that 3 months are equal to 13 weeks.

Section C (4 Mark)

Read the senario and answer to the question.

Assuming his son gets average marks in class 10th when he was just 15 years old, his father decided to send him abroad for further studies at age 21.calculate the amount that Mr. Mehta requires to invest in excess of the amount accumulated in previous question during next six years to accumulate a fund of Rs. 500000?

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

Section B (2 Mark)

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

Section B (2 Mark)

Which of the following statements concerning index funds and actively managed funds is true?

Section A (1 Mark)

___________is concerned with the rational solution to the problem at hand. It defines an idea that actual decisions should strive to approximate.

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

Section B (2 Mark)

Ram and Mrs. Ram hold 20% and 30% equity shares in Anand Ltd. respectively. They are employed in Anand Ltd. (monthly salary being Rs.20000 and Rs. 30000 respectively) without any technical / professional qualification.

Other incomes of Ram and Mrs. Ram are Rs. 70000 and Rs. 100000 respectively. The net income of Ram and Mrs. Ram for the assessment year 2013-14 shall be.

Section C (4 Mark)

Read the senario and answer to the question.

Harish wants to go abroad on a family vacation tour in January next year. A tour operator is offering him a package in which he has to pay only Rs. 20,000 on 1st January, 2011 which is 10% upfront amount, while the remaining amount is to be repaid in 36 EMIs of Rs. 7,500 each, first EMI payable on 1st February, 2011. Harish wants to know the annual effective rate of interest which he may incur in subscribing to this offer.

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?

Section A (1 Mark)

An arbitrage opportunity exists if an investor can construct a __________ investment portfolio that will yield a sure profit.

Section B (2 Mark)

Mr. Aggarwal is working in a reputed company and earning Rs. 4,50,000/- p.a. and is now 55 years old. He has invested Rs. 2,00,000/- in an annuity which will pay him after 5 years a certain amount p.a. at the beginning of every year for 10 years. Rate of interest is 8% p.a. Calculate how much he will receive at the beginning of every year after 5 years?

Section C (4 Mark)

Suppose Sunil visits his favorite coffee shop and encounters his good friend Rohit. Rohit raves about his stockbroker, whose firm employs an analyst who appears to have made many recent successful stock picks. The conversation goes something like this:

SUNIL: Hi, Rohit, how are you?

ROHIT: Hi, Sunil. I’m doing great! I’ve been doing superbly in the market recently.

SUNIL: Really? What’s your secret?

ROHIT: Well, my broker has passed along some great picks made by an analyst at her firm.

SUNIL: Wow, how many of these tips have you gotten?

ROHIT: My broker gave me three great stock picks over the past month or so. Each stock is up now, by over 10 percent.

SUNIL: That’s a great record. My broker seems to give me one bad pick for every good one. It sounds like I need to talk to your broker; she has a much better record!

Which of the following biases have been exhibited by Gaurav?

Section A (1 Mark)

Risk factors in the APT must possess all of the following the characteristics except:

Section A (1 Mark)

investment plan pays Rs. 1 lac at the beginning of 10th year for 5 years and Rs. 2 lacs for next 5 years. If the rate of interest is 10% per annum. What will be the present value of this investment?

Section A (1 Mark)

__________ organization try to segment their customers based on what product the customer purchased.

Section A (1 Mark)

Which type of portfolio allocation is usually done once every few years?

Section B (2 Mark)

A bank is about to make a Rs50 million project loan to develop a new oil field and is worried that the petroleum engineer's estimates of the yield on the field are incorrect. The bank wants to protect itself in case the developer cannot repay the loan. Which type of credit derivative contract would you most recommend for this situation?

Section C (4 Mark)

Your company had the following balance sheet and income statement information for 2003:

The industry average inventory turnover is 5. You think you can change your inventory control system so as to cause your turnover to equal the industry average, and this change is expected to have no effect on either sales or cost of goods sold. The cash generated from reducing inventories will be used to buy tax-exempt securities which have a 7 percent rate of return. What will your profit margin be after the change in inventories is reflected in the income statement?

Section B (2 Mark)

Suppose that Chicken Express, Inc. has a ROA of 7% and pays a 6% coupon on its debt. Chicken Express has a capital structure that is 70% equity and 30% debt. Relative to a firm that is 100% equity-financed, Chicken Express’s Net Profit will be ________ and its ROE will be ________.

Section A (1 Mark)

The goal of the Dow theory is to

Section A (1 Mark)

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

Section B (2 Mark)

In a collateralized mortgage obligation (CMO) a tranche:

Section A (1 Mark)

As per Hindu succession Act 1956 following person is not considered as a class I heir of the person who dies intestate

Section A (1 Mark)

Judgement rating is used in case of

Section C (4 Mark)

KB, a household product manufacturer, reported earnings per share of Rs3.20 in 1993, and paid dividends per share of Rs1.70 in that year. The firm reported depreciation of Rs315 million in 1993, and capital expenditures of Rs475 million. (There were 160 million shares outstanding, trading at Rs51 per share.) This ratio of capital expenditures to depreciation is expected to be maintained in the long term. The working capital needs are negligible. KB had debt outstanding of Rs1.6 billion, and intends to maintain its current financing mix (of debt and equity) to finance future investment needs. The firm is in steady state and earnings are expected to grow 7% a year. The stock had a beta of 1.05. (The Risk Free Rate is 6.25%.)

Estimate the value per share, using the FCFE Model.

Section A (1 Mark)

Which one of the following statements is false?

Section A (1 Mark)

An investor will take as large a position as possible when an equilibrium price relationship is violated. This is an example of _________.

Section B (2 Mark)

Which of the following statement is/are correct?

Section B (2 Mark)

Which of the following is an assumption of two stage dividend discount model?

Section B (2 Mark)

A Family consists of karta, his wife four sons and their wires and children and its income is Rs. 1000000 if by family arrangement income yield property is settled on karta his wife and sons & daughter in law than tax liability would be

Section A (1 Mark)

A European call option allows the buyer to

Section B (2 Mark)

Mehak Rana took a loan of Rs 20 Lakh in September 2010 which is payable in 10 years (monthly installments).The rate of interest is 10% p.a.

What would be the remaining principal amount after September 2012?

Section A (1 Mark)

Fundamental Analysis of security valuation includes …………

Section A (1 Mark)

In whose total income, the income of a minor child is included –

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.

Section A (1 Mark)

Unabsorbed depreciation can be carried forward for ____________.

Section A (1 Mark)

A cognitive heuristic in which decisions are made based on how representative a given individual case appears to be independent of other information about its actual likelihood. We tend to think that trends we observe are likely to continue. Which of the following is most likely consistent with this bias?

Section A (1 Mark)

Mr. Murli is 55 years old at present. He has invested some amount in an annuity which will pay him begining of the 5th year Rs. 30,000/- p.a. at the beginning of every year for 10 years. Rate of interest is 7% p.a. Calculate how much amount he has invested now?

Section A (1 Mark)

_________________ is the most important source of revenue for states in US.

Section B (2 Mark)

Ramesh living in Kolkata is a trustee for Brijesh living in Mumbai, Ramesh remits trust funds to Brijesh by bills drawn by a person of high creditworthiness in favor of the trustee as such and payable at Mumbai. The bills later got dishonored. Is Ramesh bound to make good the loss?

Section A (1 Mark)

Debt ratio is

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,

Section B (2 Mark)

PPF is a

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?

Section A (1 Mark)

The covariance of the market returns with the stocks returns is 0.007. The standard deviation of the market is 7% and standard deviation of stock’s return is 10%. What is the correlation coefficient between stocks and market returns?

Section B (2 Mark)

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

Section B (2 Mark)

What is the outstanding balance at the 23rd payment interval of a 16-year loan for Rs11 234 with semi-annual payments and an interest rate of 7.95% compounded quarterly?

Section A (1 Mark)

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

Section B (2 Mark)

How much interest is paid in total on a 3-year loan for Rs27 400? The interest rate is 8.6% compounded monthly and the payments are monthly?

Section A (1 Mark)

Which portion of his property can a muslim normally be guest according to muslim personal law?

Section C (4 Mark)

United Healthcare, a health maintenance organization, is expected to have high earning growth for the next five years and 6% after that. The dividend payout ratio will be only 10% during the high growth phase, but will increase to 60% in steady state. The return on equity was 21% in the most recent time period and is expected to stay at that level for the next 5 years. The stock has a beta of 1.65 currently, but the beta is expected to drop to 1.10 in steady state. (The treasury bill rate is 7.25%.)

Estimate the price/book value ratio for United Healthcare, given the inputs above.

Section B (2 Mark)

Commutation of pension up to a limit of _______________ is tax exempt in case the gratuity is also received.

Section B (2 Mark)

The Dow theory illustrates that the three forces that simultaneously affect stock prices are ____________.

Section A (1 Mark)

When loans are securitized they are passed on to a ____________who pools the loans and sells securities.

Section A (1 Mark)

__________ is the symptom of poor listening.

Section A (1 Mark)

A bank is considering making a loan to Neelam Pandey. The bank is looking at her credit report from Equifax and also examining the reason Neelam has put on the loan application for needing the loan? What aspect of evaluating a consumer loan application is the bank looking at?

Section A (1 Mark)

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

Section A (1 Mark)

Total current assets of a company are Rs.960 lakh while the current liabilities (other than bank borrowings) are Rs.300 lakh. If the company borrowed Rs.350 lakh, what will be the amounts of Maximum Permissible Bank Finance (MPBF) under the (method I) of the Tandon committee recommendations?

Section A (1 Mark)

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

Section A (1 Mark)

Which of the following is true regarding credit card loans?

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.

Section A (1 Mark)

How many types of power of attorney are there?

Section B (2 Mark)

Consider the single factor APT. Portfolio A has a beta of 0.2 and an expected return of 13%. Portfolio B has a beta of 0.4 and an expected return of 15%. The risk-free rate of return is 10%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio _________ and a long position in portfolio _________.

Section B (2 Mark)

Which of the following statements is correct?

Section B (2 Mark)

To pay for new equipment with a cash price of Rs7500, you need to borrow at 5.3% compounded monthly, then make monthly payments for 32 months. How many fewer months would it take to pay back the loan if you had also saved Rs600 to pay at the end?

Section A (1 Mark)

According to Michael Porter, there are five determinants of competition. An example of _____ is when new entrants to an industry our pressure on prices and profits.

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 4343

• If Nifty closes at 3419

Section C (4 Mark)

Read the senario and answer to the question.

If Mahesh has the option of 3 funds whose details are as below, find Jensen’s index for fund A, Treynor index for fund B and Sharpe index for the market

Section A (1 Mark)

The demand for insurance tends to be inelastic because of

Section A (1 Mark)

A Wealth Management model in which private client and Institutional Asset Management are kept entirely separate is known as

Section C (4 Mark)

Data on following mutual funds given below:

Risk free return is 8%. Calculate Treynor measure.

Section A (1 Mark)

For a “single income family” priority is on

Section A (1 Mark)

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

Section A (1 Mark)

Shyam invests in a plan in which he has to pay Rs. 10,000/- per year Starting from the end of 5th year till the end of 12th. How much amount Should he invest today in order to meet his objective. If the interest rate is 10%p.a.?

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 Technical Services are:

Section B (2 Mark)

What is the size of the final unequal payment of a loan that has 89.34 payments and the equal payment size is Rs215.64? The interest rate is 3% per compounding period.

Section A (1 Mark)

An aggressive asset allocation would contain larger proportions of __________ than a conservative allocation.

Section A (1 Mark)

Manish started investing in a savings scheme by depositing Rs. 30,000/-. He plans to increase his contribution every year by Rs. 2,000/-. If rate of interest offered in this scheme is 8 % per annum calculate the amount Manish will get on maturity of this scheme after 15 years?

Section C (4 Mark)

Omax Inc. one of the largest developer of residential projects, reported earnings per share of Rs 8.0 in 2003, and paid dividends per share of Rs 4.8 in that year. The firm is expected to report earnings growth of 25% in 2004, after which the growth rate is expected to decline linearly over the following six years to 7% in 2009. The stock is expected to have a beta of 0.85 and current risk free rate is 6.25%.

Estimate the value of the firm using the H Model.

Section C (4 Mark)

Read the senario and answer to the question.

By calculating HLV of Mahesh indicate the shortfall in his life insurance coverage using the given data:

Mr. Mahesh age 52, retirement age 60, paying professional tax of Rs. 5800 and income tax subject to allowable deductions as Rs. 230000, reasonable self maintenance expenditure estimated Rs. 140000 p.a., life insurance premium for self Rs. 25000 with total sum assured Rs. 1200000. He also pays insurance premium of Rs. 15500 and Rs. 7000 for life insurance policy of his wife and son respectively. Rate of interest assured for capitalization of future income is at 7%

Section B (2 Mark)

Which of the following statements is / are correct?

Section B (2 Mark)

A financial institution plans to issue a group of bonds backed by a pool of automobile loans. However, they fear that the default rate on the automobile loans will rise well above 4 percent of the portfolio – the projected default rate. The financial institution wants to lower the interest payments if the loan default rate rises too high. Which type of credit derivative contract would you most recommend for this situation?

Section C (4 Mark)

Mr. Sushobhan Adhikari, 56 years old, employee of Mega India Ltd, receives the following salary and perquisites from his employer during the previous year 2007–08.

A rent-free furnished house in Patna (rent of unfurnished house paid by employer- Rs. 84,000, rent of furniture Rs. 18,000, free services of a gardener (salary-Rs. 4,000), free services of cook (salary-Rs. 3,600), free services of watchman (salary-Rs. 900). He owns a small house at Patna.

Mr. Adhikari makes the following payments and investments during the year:

Mr. Adhikari comes to Mr. Gupta, CWM®, in September-2008 for developing a wealth plan to fulfill his financial goals. Mr. Adhikari will retire on 31st December, 2008 after completing 28 years of service. He is expecting a growth of Rs. 1,500 in his basic pay in the last year of his employment. The company is expecting a 5% growth every year in its turnover. His daughter Pallavi has completed her education and his main liability is the amount he may have to spend for her marriage. On his retirement he is expected to receive following amount:

He also has also informed to the planner following his other assets and investments:

He has given his Kolkata Flat on 12,500 p.m. rent. Municipal value of the property is Rs. 1,45,000, fair rent is Rs. 1,60,000 and standard rent is 1,40,000. Municipal tax paid by him are as follows:

In July, 2008 rent is increased from Rs. 11,500 to Rs. 12,500 pm with effect from 01/04/2007. Due to some dispute rent was not received in 2007–08 but all arrears of rent till date are paid on July 1, 2008. Maximum eligible amount of PPF contribution deposited in March, 2008.

His actual expenses before retirement are Rs. 23,500 per month.

Main goals of Mr. Adhikari:

● To provide for his daughter’s marriage

● Ensuring that his family is protected financially in the event of any mishap

● Minimize tax burden

● Establish an investment portfolio that gives high returns over long term

Assumptions:

● Mr. Adhikari needs to provide for himself and his family till he is 75.

● Inflation rate after retirement to be 4%

● Monthly expenses after retirement will be 15% less than before retirement

After detailed discussion, Mr. Gupta, CWM®, has suggested a revision in the portfolio as below to be implemented from October, 2008.

Section B (2 Mark)

Basic Idea of retirement benefit plan is

Section A (1 Mark)

Which is not the basic ingredient of a valid trust?

Section A (1 Mark)

----------- shifts the weights of securities in the portfolio to take advantage of areas that are expected to do relatively better than other areas.

Section A (1 Mark)

An investor will take as large a position as possible when an equilibrium price relationship is violated. This is an example of _________.

Section C (4 Mark)

Read the senario and answer to the question.

If the interest on a sum of amount is compounded annually at the rate of 14% per annum for 3 years, what is the effective continuously compounding rate of interest?

Section A (1 Mark)

Which one of the following statements is untrue?

Section B (2 Mark)

Both __________ depend on electronic information that has been collected about customers, in place of human knowledge, to build and manage relationships.

Section B (2 Mark)

Which of the following two outcomes is an example of Loss Aversion Bias:

Section A (1 Mark)

A testamentary trust is affected after the

Section A (1 Mark)

Marketing relationships are:

Section A (1 Mark)

If a female dies without leaving any issue them property inherited from her father or mother the property will devolve upon

Section A (1 Mark)

The cumulative number of futures contracts that are not offset at any point in time is called:

Section A (1 Mark)

A trough is ________.

Section B (2 Mark)

An approved superannuation fund must have a minimum of _______ trustees

Section A (1 Mark)

If your credit application is denied, you:

Section A (1 Mark)

These instruments rest on pools of credit derivatives that mainly insure against defaults on corporate bonds. The creators of these instruments do not have to buy and pool actual bonds but can create these instruments and generate revenues from selling and trading in them.

Section B (2 Mark)

When the income of an individual includes Rs. 20000 as the income of his minor child in terms of section 64(1A), taxable income in this respect will be:

Section A (1 Mark)

Which of the following is a risk of using credit derivatives?

Section C (4 Mark)

Azhar deposits Rs. 12,500 in an account that pays a ROI of 20% p.a compounded annually on 5th. Of March 2010. Calculate the date on which the balance in his account would be Rs.35,338/-

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

Section A (1 Mark)

The risk that occurs when the index used for determination of interest earned on the CDO trust collateral is different from the index used to calculate the interest to be paid on the CDO trust is known as______________.

Section A (1 Mark)

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

Section A (1 Mark)

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

Section A (1 Mark)

Which one of the following statements is/are true?

Section C (4 Mark)

Read the senario and answer to the question.

Jogen commuted his 40% of pension in April, 2008 with Rs. 2,15,000.What would be the taxable amount on commuted pension received by Jogen, if he would retire from a private organization?

Section A (1 Mark)

What would be the tax liability if tea and snacks are provided in the office after office hours?

Section B (2 Mark)

Which of the following statement is/are correct?

Section B (2 Mark)

Lucy purchased a rental house a few years ago for $100,000. Total depreciation to date is $35,000. In the current year, she sells the house for $155,000 and pays $10,000 selling expenses. Calculate Lucy's gain on the sale.

Section B (2 Mark)

A client has a minor child she is concerned about what might happen if she was to die while the child was still young and unable to sensibly handle a sizeable in heritance one solution could be to draft her will so that the child receives the asset once reaching age 21 this is an example of

Section A (1 Mark)

A covered call position is equivalent to a

Section C (4 Mark)

Which of the following statements are correct?

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?

Section A (1 Mark)

A(n) __________________ guards against the losses in the value of a credit asset. It would pay off if the asset declines significantly in value or if it completely turns bad.

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?

Section A (1 Mark)

Financial Gerontology tries to assess client needs based on __________

Section B (2 Mark)

The current market price of a share of JVJ stock is Rs60. If a put option on this stock has a strike price of Rs55, the put

Section B (2 Mark)

The Elliot Wave Theory ____________.

Section A (1 Mark)

Mansi deposits Rs. 50,000/- in a bank account which pays interest @ 10 % per annum. How much can be withdrawn at the beginning of each year for 5 years if first withdrawal is 6 years from now?

Section A (1 Mark)

___________CRM automates and improves customer-facing and customer supporting business processes

Section C (4 Mark)

Read the senario and answer to the question.

Calculate his Life Insurance Coverage Ratio based on his net worth.

Section B (2 Mark)

If an investor strongly believes that the stock market is going to have a sharp decline shortly, he or she could maximize profit by

Section A (1 Mark)

A market timing approach that increases the proportion of funds in stocks when the stock market is expected to be rising, and increases cash when the stock market is expected to be falling is a:

Section B (2 Mark)

As per Article 11 double Taxation Avoidance Agreement with US Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed:

(a) ____per cent of the gross amount of the interest if such interest is paid on a loan granted by a bank carrying on a bona fide banking business or by a similar financial institution (including an insurance company); and

(b) _____ per cent of the gross amount of the interest in all other cases.

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.

Section A (1 Mark)

The borrower's attitude toward his or her credit obligations is called:

Section B (2 Mark)

Consider a one-year maturity call option and a one-year put option on the same stock, both with striking price Rs100. If the risk-free rate is 5%, the stock price is Rs103, and the put sells for Rs7.50, what should be the price of the call?

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?

Section A (1 Mark)

Book building is used to help in better

Section A (1 Mark)

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

Section C (4 Mark)

Pinnacle India Ltd, reported a net profit of Rs1.085 billion on sales of Rs7.425 billion in 1993. The sales/book value ratio in 1993 was approximately 1.2, and the dividend payout ratio was 20%. The book value per share was Rs19 in 1993. The firm is expected to maintain high growth for ten years, after which the growth is expected to drop to 6%, and the dividend payout ratio is expected to increase to 65%. The beta of the stock is 1.05. (The treasury bill rate is 7%.)

Estimate the price/sales ratio for the company.

Section A (1 Mark)

In US, how many states do not have a corporate income tax?

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.

Section A (1 Mark)

Which of the following is not normally one of the reasons for a change in an investor's circumstances?

Section A (1 Mark)

A bank is considering making a loan to Sandeep Hunjan. Sandeep owns his own home and has lived there for the past four years. What aspect of evaluating a consumer loan application is this fact most concerned with?

Section A (1 Mark)

Passive Preserver follows a ___________ Investment Style

Section C (4 Mark)

Read the senario and answer to the question.

Mr. Bhatia thinks he would require 50 lacs in today’s terms for Neena’s wedding at 25 years of age. What amount he has to save at the end of every month for Neena’s wedding requirement with a 7% inflation rate and investment earning minimum 12% p.a.

Section B (2 Mark)

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

Section A (1 Mark)

The CDO structures which are used by asset management companies, insurance companies and other investment shops with the intent of exploiting a mismatch between the yield of underlying securities and lower cost of servicing the CDO structures are called___________.

Section A (1 Mark)

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

Section B (2 Mark)

A constant proportion portfolio insurance (CPPI) policy calls for:

Section A (1 Mark)

In US which group is unlikely to support tax limitations?

Section B (2 Mark)

You borrowed Rs8500, with the understanding that you are to make monthly payments over 36 months. Interest is charged at 7% compounded monthly. If you were to increase your payments by Rs20 per month, how much less time would it take you to pay back the loan?

Section A (1 Mark)

Disclaimers and assumptions are a part of

Section C (4 Mark)

You are considering adding a new product to your firm's existing product line. It should cause a 15 percent increase in your profit margin (i.e., new PM = old PM x 1.15), but it will also require a 50 percent increase in total assets (i.e., new TA = old TA x 1.5). You expect to finance this asset growth entirely by debt. If the following ratios were computed before the change, what will be the new ROE if the new product is added and sales remain constant?

Section B (2 Mark)

Jaipur Golden Railroad reported net income of Rs770 million in 1993, after interest expenses of Rs. 320 million. (The corporate tax rate was 36%.) It reported depreciation of Rs.960 million in that year, and capital spending was Rs1.2 billion. The firm also had Rs. 4 billion in debt outstanding on the books, rated AA (carrying a yield to maturity of 8%), trading at par (up from Rs3.8 billion at the end of 1992). The beta of the stock is 1.05, and there were 200 million shares outstanding (trading at Rs 60 per share), with a book value of Rs5 billion. Jaipur Golden paid 40% of its earnings as dividends and working capital requirements are negligible. (The treasury Bill rate is 7%.)

Estimate the free cash flow to the firm in 1993.

Section B (2 Mark)

Which of the following statements is/are correct?

Section A (1 Mark)

Which of the following comes at the high end of product margin in the value added pyramid of wealth management?

Section C (4 Mark)

Mr. Saxena, age 45 years, is a software engineer and promoter of an Indian MNC. His family comprises his wife Anupama, age 43 years, who is a house wife, elder son Arup, 16 years (studying in 10th standard) and daughter Aarti, 14 years (studying in 8th standard). The family resides in their self owned residential house in Mumbai. Most of their life amenities such as cars, abroad vacations and full education cost of both kids are provided by Mr. Saxena’s company, as he is the Managing Director of his company. The company is growing consistently and is on way to become a global legend in its field of operations. As such the future prospects of Mr. Saxena are generous and progressive.

Mr. Saxena is now planning to allocate his resources in the right fashion with your help as a Chartered Wealth Manager.

For this, he has disclosed his current personal financial details as follows:

Other details for FY 2007–08

1. Mr. Saxena has made investments worth Rs. 1.50 Lakh qualified U/S 80C.

2. He has donated Rs. 50,000 to Prime Ministers National Relief Fund.

3. He has transferred interest received by him on debentures to his wife’s bank account the same date he received it.

4. Mr. Saxena’s minor son, Arup, is a recognized child artist in children cinema and documentary films. Arup earned a sum of Rs. 1,50,000 from his assignments.

Mr. Saxena wants to resolve all estate bequeathing matters in his life time so that there should be no dispute after his death. For this purpose he has prepared a “Holograph Will”.

Current estimates of economy are positive and interest rates are not likely to increase further in near future. The family has a health cover provided by the company of Mr. Saxena. Also his house with all its contents is insured adequately.

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?

Section A (1 Mark)

If the economy were going into a recession, an attractive industry to invest in would be the ________ industry.

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?

Section A (1 Mark)

AUM stands for

Section B (2 Mark)

The expected returns and standard deviations of stock A and B are:

Manish buys Rs.20000 stock A and sells short Rs.10000 of stock B, using all the proceeds to buy more of stock A. The correlation between the two securities is 0.25. What are the expected return and the standard deviation of Manish’s portfolio?

Section A (1 Mark)

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

Section A (1 Mark)

Why have consumers/customers been so hyper-aware and so nervous?

Section B (2 Mark)

A January month Nifty Futures contract will expire on the last _____ of January

Section C (4 Mark)

Ms. Deepika is a famous Bollywood actress having a busy and successful professional business venture in the name of ‘Millennium Production House” with her childhood friend Navin. Initially she received few small assignments. But after a documentary film, which was welcomed by people of Mumbai, she becomes quite successful. She wants to set aside today a capital sum to be liquidated over the next 10 years for the care of her aged mother living alone in MADARUAI with her sisters. The desired income stream for her mother as per her status is Rs. 2,40,000 p.a. beginning after one year and rising 5% p.a. each year thereafter. Deepika belives that the investment earnings on the fund will be 8% p.a.

In the last 8 years, there was no looking back in the business with 22 employees and around Rs. 1.25 crore of annual income, net of all expenses. She leads a very comfortable life as a “modern successful single lady”. She has already constructed a house valuing Rs. 3.75 crore and has a portfolio of assets which include precious metals like gold, silver etc. worth Rs. 1.25 crore, direct and indirect investment in equities (mutual funds) Rs. 2.75 crores, bank deposits and small savings scheme investments Rs. 0.75 crore.

You as a CWM® has been approached by her, for advice on retirement planning. She expects to work for another 10 years and after that wants to pursue her hobbies of traveling and photography and want to be active in social work. She has expressed desire to leave half of her estate in equal proportion to her two nephews and donate other half to charitable trust “Mother Care”.

Section B (2 Mark)

Compulsory maintenance of account is required u/s 44AA of IT, if the gross receipt/ total sales exceed _______

Section B (2 Mark)

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?

Section A (1 Mark)

Select the INCORRECT statement regarding the CML

Section A (1 Mark)

Which of the following statement is true?

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

Section B (2 Mark)

An employee who is not resident in the UK will be liable to UK income tax:

Section C (4 Mark)

Division Z is a profit centre, which produces four products A, B, C and D, Each product is sold in the external market also. Date for the period is as follows:

Product D can be transferred to division Y but the maximum quantity that might be required for transfer is 2,500 units of D.

The maximum sales in the external market are:

Division Y can purchase the same product at a slightly cheaper price of Rs. 125 per unit instead of receiving transfer of product D from division Z.

What should be transfer price for each unit for 2500 units of D, if the total labour hours available in division Z is:

Section B (2 Mark)

Buyers of call options __________ required to post margin deposits and sellers of put options __________ required to post margin deposits.

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?

Section A (1 Mark)

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

Section A (1 Mark)

The slope of the CML is the:

Section A (1 Mark)

Assessing client’s level of risk tolerance is done while

Section A (1 Mark)

Rahul deposits Rs. 30,000/- per year, at the end of the year, into an account for 30 years. What amount would be accumulated in that account at the end of 30 years if ROI is 9 % per annum?

Section C (4 Mark)

A 14% semiannual-pay coupon bond has six years to maturity. The bond is currently trading at par. Using a 25 basis point change in yield, the effective duration of the bond is closest to:

Section C (4 Mark)

Which of the following firms is likely to have the same value from both models?

Section B (2 Mark)

What is the size of the final unequal payment of a loan for Rs15 600 and it has monthly payments of Rs500? The interest rate is 9.92% compounded quarterly.

Section A (1 Mark)

During “Building the foundation” life stage, we learn about _______

Section A (1 Mark)

As per ARTICLE 12 in DTTA with US , the maximum tax rate on the gross amount of the royalties or fees for included services in the Article is:

Section A (1 Mark)

The difference between a wagering contract and insurance contract is ___________.

Section B (2 Mark)

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

Calculate the expected return on security ABC?

Section A (1 Mark)

While matching orders for equity trading in NSE, which one of the following gets precedence over all the others?

Section A (1 Mark)

Corrections are often followed by ________.

Section A (1 Mark)

Response of listening falls under which one of the following categories?

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.

Section A (1 Mark)

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

Section A (1 Mark)

Tax exemption limit for the lump sum received towards Leave encashment on retirement is at _______________

Section C (4 Mark)

Company A is financed with 90 percent debt, whereas Company B, which has the same amount of total assets, is financed entirely with equity. Both companies have a marginal tax rate of 35 percent. Which of the following statements is most correct?

Section C (4 Mark)

Read the senario and answer to the question.

Harish incurred Rs. 10 Lakh on the construction of his house five years ago which has depreciated today to Rs. 7 Lakh. The cost of construction over the period has gone up by 70%.The depreciated value of household items is Rs. 2.5 Lakh and their present cost of replacement is Rs. 4 Lakh. Harish wants to buy a Householders’ insurance policy in such a way that the house is insured on reinstatement basis and household goods on the basis of written down value. How much total insurance coverage should he take from the insurance company?

Section A (1 Mark)

Which of the following is true regarding the resistance level?

Section A (1 Mark)

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

Section B (2 Mark)

Mansi needs Rs. 25,000/-, 5 years from now. She would like to make equal payments at the Begin of each year from now onwards into an account that yields annual ROI @ 7 % per annum. What should be her annual payments?

Section A (1 Mark)

A(n)______________________ loan is a short- or medium-term loan repayable in two or more consecutive payments, usually monthly or quarterly.

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.

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

Section A (1 Mark)

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