Explanation:

Offer for Sale (OFS) is a method of share sale typically used by listed companies to sell their shares directly to the public through the stock exchange. It allows existing shareholders, including promoters, to sell their shares to investors without the company issuing new shares. OFS is commonly used by listed companies to comply with regulatory requirements or to provide an exit route for existing shareholders.

Explanation:

Liquidity risk is the risk of not being able to find a buyer or seller for the equity holdings. Liquidity risk is measured by impact cost.

The impact cost is the percentage price movement caused by a particular order size (let’s say an order size of Rs.1 Lakh) from the average of the best bid and offer price in the order book snapshot. The impact cost is calculated for both, the buy and the sell side. Less liquid stocks are more thinly traded, and a single large trade can move their prices considerably. Such stocks have high impact costs. A lower market impact implies the stock is more liquid.

Explanation:

Secondary markets facilitate the trading of already issued securities among investors. By providing liquidity, these markets allow investors to buy and sell securities easily, thus enabling price discovery and ensuring that investors can exit their investments when needed. This liquidity is crucial for promoting confidence among investors and attracting capital to the primary market, where new securities are issued.

Explanation:

Inflation erodes the purchasing power of money over time, meaning that the same amount of money will buy fewer goods and services in the future. Therefore, to maintain the same standard of living in retirement, individuals need a larger retirement corpus to counteract the effects of inflation. This is because expenses are expected to increase due to rising prices, necessitating a larger sum of money to cover those expenses over the retirement period.

Explanation:

Stock exchanges provide a platform for the trading of securities that are already issued. Investors can buy and sell these securities through the exchange, facilitating liquidity in the market. Transactions are executed electronically, ensuring transparency and efficiency in trading. As a result, stock exchanges play a crucial role in the secondary market by enabling investors to access a wide range of securities for subsequent purchases and sales.

Explanation:

Arbitrage refers to the practice of simultaneously buying and selling an asset in different markets to profit from the price difference. This strategy takes advantage of inefficiencies in the market, exploiting the temporary discrepancies in prices for the same asset. By quickly capitalizing on these differences, arbitrageurs aim to earn risk-free profits. Arbitrage helps to ensure that prices for the same asset are aligned across different markets, contributing to market efficiency and liquidity.

Explanation:

A putability feature of a bond gives the bondholder the right, under specific conditions, to sell the bond back to the issuer before the bond’s maturity date. This feature provides the bondholder with flexibility and downside protection in case the bond’s market value declines or if certain events occur that adversely affect the bond’s value. It allows investors to mitigate potential losses by selling the bond back to the issuer at a predetermined price, thus providing them with an exit option under unfavorable circumstances.

Explanation:

Under the Senior Citizen Savings Scheme (SCSS), an account can be extended for a period of 3 years beyond the maturity period, subject to certain conditions. This extension provides senior citizens with an option to continue earning interest on their savings for an additional period after the initial maturity of the scheme. It offers them flexibility and ensures that their funds remain invested in a safe and secure instrument for a longer duration, catering to their financial needs during their retirement years.

Explanation:

Sharpe’s performance measure calculates the excess return of a portfolio (i.e., risk premium) over the risk-free rate and divides it by the standard deviation of the portfolio’s returns. This ratio provides a measure of the portfolio’s risk-adjusted return, indicating how much excess return is generated for each unit of risk taken. It helps investors evaluate the efficiency of a portfolio in generating returns relative to the level of risk undertaken. A higher Sharpe ratio typically indicates a better risk-adjusted performance.

Explanation:

The correlation coefficient is a statistical measure that quantifies the strength and direction of the relationship between two variables. It ranges from -1 to +1, where:

• A correlation coefficient of +1 indicates a perfect positive correlation, meaning that as one variable increases, the other variable also increases proportionally.

• A correlation coefficient of -1 indicates a perfect negative correlation, meaning that as one variable increases, the other variable decreases proportionally.

• A correlation coefficient of 0 indicates no linear relationship between the variables.

Therefore, the correlation coefficient provides valuable insights into how two variables move relative to each other, helping analysts and investors understand the degree of association between them.

Explanation:

In the avalanche mode of repayment, the borrower prioritizes paying off the loan with the highest interest rate first while making minimum payments on other debts. This strategy helps minimize the overall interest paid over time and accelerates the process of becoming debt-free. By focusing on the loan with the highest interest rate, the borrower saves money on interest costs and can pay off debts more efficiently.

Explanation:

The objective of the Depositories Act 1996 is to achieve multiple goals, including making securities of public limited companies freely transferable, dematerializing securities in the depository mode, and providing for the maintenance of ownership records in a book entry form. This comprehensive approach aims to modernize and streamline the securities market infrastructure, enhance transparency, and facilitate more efficient trading and settlement processes.

Explanation:

An AIF (Alternative Investment Fund) consists of privately pooled funds. This means that the funds collected in an AIF come from a limited number of sophisticated investors, rather than from the general public. AIFs are structured this way to cater to investors who are seeking alternative investment opportunities beyond traditional asset classes and who typically have a higher risk tolerance and greater investment expertise.

Explanation:

Dividend Yield = (Dividend in Rs / Current Market Price) * 100
Dividend = 200% of Face Vale = Rs 20
Current Market Price = Rs 15000/100 = Rs 150
Dividend Yield = (20/150)*100 = 13.33%

Explanation:

Exchange Traded Funds (ETFs) hold a portfolio of securities that replicates an index and are listed and traded on the stock exchange. At least 95% of the total assets should be in securities represented in the index being tracked.

Explanation:

A person can hold only one PPF account in their name except an account in the name of a minor child to whom he or she is a guardian.

HUFs and NRIs are not allowed to open PPF accounts.

If a resident subsequently becomes an NRI during the prescribed term, he/she

may continue to subscribe to the fund till its maturity on a non-repatriation basis.

Joint account cannot be opened. Nomination facility is available.

Explanation:

Standard deviation measures the total risk or volatility of an investment, taking into account both systematic (market-related) and unsystematic (specific to the asset) risk. On the other hand, beta specifically measures the systematic risk of an investment, indicating its sensitivity to movements in the overall market. Therefore, while standard deviation provides a comprehensive measure of risk, beta focuses solely on the systematic component of risk.

Explanation:

=RATE(1,0,-233,250) = 7.3%

Explanation:

SEBI (Securities and Exchange Board of India) was established to regulate and oversee the securities markets in India. While SEBI regulates various aspects of securities markets, including stock exchanges, it does not have the authority to regulate the business in other securities markets beyond stock exchanges. Its functions primarily include promoting fair and orderly securities markets, protecting the interests of investors, regulating self-regulatory organizations, overseeing substantial acquisitions of shares, regulating takeovers, and prohibiting insider trading.

Explanation:

Strategic asset allocation and optimal asset allocation are approaches that tailor investment portfolios to an individual’s goals, risk tolerance, and life stage. They aim to achieve a balance between risk and return, with strategic allocation setting the long-term mix of assets and optimal allocation fine-tuning it for maximum returns or minimum risk. Both strategies are crucial for aligning investments with specific investor needs.

Explanation:

In case of interest rate movements, the price change is more significant for long-maturity bonds compared to short-maturity bonds. This is because long-maturity bonds have a higher duration, making them more sensitive to changes in interest rates. Short-maturity bonds, on the other hand, have lower duration and therefore experience less price volatility in response to interest rate fluctuations.

Explanation:

The simplest objective of making a family budget is to list all possible income, expenses, and savings to strike a balance. This process helps individuals or families understand their financial situation, allocate resources effectively, and ensure that income covers expenses while allowing for savings. It provides a clear overview of where money is coming from, where it’s going, and how much is being saved, enabling better financial planning and decision-making.

Explanation:

Weight           Expected Return            Weight X Expected Return
0.2                         0.09                                      0.018
0.1                          0.12                                       0.012
0.3                          0.15                                       0.045
0.4                          0.18                                       0.072
Total = 0.147

Explanation:

Within 30 days of dividend declaration, warrants will have to be sent to investors. This timeframe ensures timely distribution of dividends to shareholders, maintaining transparency and accountability in the process. It allows investors to receive their entitled dividends promptly, contributing to their satisfaction and trust in the company’s management.

Explanation:

In financial markets, a “risk-free” security is one that is considered to have no risk of default. Typically, government securities such as Treasury bills or bonds issued by financially stable governments are considered risk-free because they are backed by the full faith and credit of the issuing government. Other securities like certificates of deposit, bank deposits, and commercial papers may carry some level of risk, albeit lower compared to many other investment options, but they are not entirely risk-free. Therefore, none of the options provided qualify as risk-free securities.

Explanation:

In a multi-asset allocation fund, the fund manager invests across various asset classes such as equities, fixed income securities, and alternative investments to diversify risk and potentially enhance returns. To ensure sufficient diversification, SEBI regulations require that such funds allocate a minimum of 10% to each of the three asset classes they invest in. This requirement helps maintain a balanced exposure across different types of assets, thereby reducing the overall risk associated with the fund.

Explanation:

Covariance = Correlation * (Std deviation of Stock 1 X Std deviation of Stock2)

Std deviation = Square root of variance

Std deviation of Security A = 20

Std deviation of Security B = 30

Covariance = 0.9*20*30 = 540

Explanation:

In an offer for sale (OFS), existing shareholders, typically promoters or large investors, sell their shares directly to the public through the stock exchange. The funds raised through the sale belong to these existing shareholders who are selling their ownership stakes in the company. The company itself does not receive any funds from the sale, as it is merely a transaction between existing shareholders and investors in the secondary market.

Explanation:

SEBI, the Securities and Exchange Board of India, is empowered by various statutes to protect the interests of investors in securities, promote the development of the securities market, and regulate the securities market. It works to ensure transparency, fairness, and efficiency in the market, thereby fostering investor confidence and market integrity.

Explanation:

Custodians are financial institutions responsible for holding and safeguarding the cash and securities of the mutual fund. They play a crucial role in ensuring the security of the fund’s assets, maintaining accurate records, and facilitating transactions on behalf of the fund manager. Custodians provide custody services to mutual funds by securely holding their assets, facilitating settlements, and maintaining records of transactions, thereby ensuring the safety and integrity of the fund’s investments.

Explanation:

The price-to-earnings (P/E) ratio is calculated by dividing the current market price of a stock by its earnings per share (EPS). It’s a valuation metric that helps investors assess the relative value of a stock by comparing its market price to its earnings. A higher P/E ratio typically indicates that investors are willing to pay more for each unit of earnings, suggesting that the stock may be overvalued. Conversely, a lower P/E ratio may indicate that the stock is undervalued.

Explanation:

A flat yield curve occurs when the yields on bonds with different maturities are relatively similar. In other words, the yield curve is flat when the difference between short-term and long-term interest rates is minimal. This indicates that investors have similar expectations for interest rates in the short and long term.

Explanation:

Term insurance provides a high-value life cover for a specified term or period at relatively lower premiums compared to other types of life insurance plans. This type of insurance is focused solely on providing financial protection to the insured’s beneficiaries in case of the insured’s death during the policy term. Since it does not have a savings or investment component, the premiums are lower, making it an attractive option for those seeking maximum coverage at an affordable cost.

Explanation:

The Securities Contracts (Regulation) Act, 1956 (SCRA) is the legislation in India that primarily defines and regulates securities. It provides legal definitions and frameworks for various aspects of securities trading, including the types of securities, exchanges where securities are traded, regulations regarding stock exchanges, and the role of regulatory authorities like SEBI. This act lays down the foundational framework for the securities market in India and governs the issuance, trading, and regulation of securities.

Explanation:

In a private placement, securities of an unlisted company are issued directly to a select group of investors without being offered to the general public. This method is commonly used by companies to raise capital from specific investors such as institutional investors, high net worth individuals, or venture capitalists. Private placements offer advantages such as flexibility in structuring the offering and lower regulatory requirements compared to public offerings.

Explanation:

When a minor becomes a major, several changes need to be made to their accounts and documentation to reflect their new status. This includes updating bank particulars, performing KYC (Know Your Customer) procedures, and potentially opening a new demat account if required. These actions ensure that the individual’s accounts and information are accurate and up-to-date according to their changed legal status as an adult.

Explanation:

=EFFECT(12%,4)

=12.55%

Explanation:

Routine product promotion material is generally not considered price-sensitive information because it typically relates to marketing efforts and does not directly impact the financial performance or operations of the company. Price-sensitive information refers to any information that could potentially affect the stock price if it were made public. Periodical financial results, intended declaration of dividends, and issue of securities or buy-back of securities are examples of information that can significantly impact investors’ decisions and are therefore considered price-sensitive.

Explanation:

Technical analysis primarily focuses on analyzing historical price and volume data to forecast future price movements of securities. By examining price patterns, trends, and other indicators, technical analysts attempt to predict the direction and magnitude of price changes over time. Therefore, technical analysis can help investors anticipate what is “likely” to happen to prices of securities in the future.

Explanation:

Amount to be transferred to New Mortgage Scheme – Rs 114042 + 3% closing cost

3% closing cost of Rs 114042 = 114042*0.03 = 3421.26

Total amount to be refinanced = 114042+3421.6 = 117463.26

EMI=PMT(7%/12,17*12,117463.3,0,0) =986.29

Explanation:

=FV(10%,3,0,-10000) = Rs 13,310

Explanation:

A put option is a contract that gives the bondholder the right, but not the obligation, to sell the bond back to the issuer at a pre-fixed date before maturity. This option provides the bondholder with the flexibility to redeem the bond early if desired. Therefore, the option embedded in this contract is known as a put option.

Explanation:

Rs = 4% + [1.2*(12%-4)]

Rs = 4% + [1.2*8%]

Rs = 13.6%

Explanation:

The terms on which a security is issued, such as the interest rate, maturity date, and redemption provisions, are primarily decided by the issuers of the security. Issuers determine these terms based on various factors, including their funding needs, market conditions, and investor demand. While regulators and government may impose certain regulations or guidelines, the specific terms of a security issuance are typically determined by the issuing entity. Therefore, issuers play a central role in deciding the terms of a security issuance.

Explanation:

When investment is made by a minor, Know Your Customer (KYC) compliance is required from the guardian. This is because minors are not legally capable of entering into contracts or financial transactions on their own behalf. Therefore, the guardian acts on behalf of the minor in financial matters, including completing the necessary KYC procedures. The guardian provides the necessary identification and other documents required for KYC compliance, ensuring that the investment is made in compliance with regulatory requirements and in the best interest of the minor.

Explanation:

A retail investor in a public issue is typically defined as an individual investor who applies for securities worth up to Rs. 2 lakhs in a public offering. This classification is based on the Securities and Exchange Board of India (SEBI) regulations, which set the limit for retail investors participating in public issues. Retail investors are distinct from institutional investors, who are typically large entities such as mutual funds, insurance companies, or pension funds. This classification helps ensure fair and equitable participation in public offerings and contributes to the broadening of the investor base.

Explanation:

P/E = 15

EPS = Earnings per share = PAT / No of Equity Shares

EPS = 20 crore / No of Equity Shares

No of Equity shares = Equity Capital / Face value

No of Equity shares = 5 crore / 10 = 50 lakhs i.e 0.5 crore

So EPS = 20/0.5 = 40

Price / EPS = 15

Price / 40 = 15

Hence Price of the share = 40*15 = Rs 600

Explanation:

Effective annual rate = (1+R)^n – 1

Here R is 12%/4 since interest is compounded quarterly

n is 4 since there are 4 quarters in a year

So Annual rate = (1.03^4) – 1 = 0.1255 = 12.55%

Explanation:

Equity shares, also known as common stock or ordinary shares, represent ownership in a company. Holders of equity shares have a stake in the company’s ownership and are entitled to various rights, including the right to participate in the company’s profits through dividends and the right to vote on important matters concerning the company’s affairs, such as the election of the board of directors. Unlike bonds and commercial papers, which represent debt instruments, equity shares represent ownership interests in the company’s equity capital.

Explanation:

Interest rate swaps involve the exchange of predetermined streams of interest payments between two parties. These swaps allow entities to exchange their interest rate exposure from fixed to floating rates or vice versa, without actually exchanging the underlying principal amount. Interest rate swaps are commonly used to manage interest rate risk, hedge against fluctuations in interest rates, or to modify the cash flow characteristics of debt obligations. They are a type of financial derivative instrument commonly used in financial markets.

Explanation:

SCORES stands for “SEBI Complaints Redress System.” It is a centralized web-based system developed by SEBI (Securities and Exchange Board of India) for lodging and tracking investor complaints. SCORES provides investors with a platform to lodge complaints related to securities market issues, such as grievances against listed companies, intermediaries, or market entities. It ensures efficient redressal of investor complaints and promotes transparency and accountability in the securities market.

Explanation:

A call option in debt securities refers to the issuer’s right, but not the obligation, to redeem the bond before its maturity date. This option provides flexibility to the issuer, allowing them to refinance debt at lower interest rates if market conditions become favorable. Therefore, all the options listed in the question are correct explanations of what a call option entails in debt securities.

Explanation:

As per the Do’s and Don’ts for investors issued by SEBI – Do not give your money for investment to the Investment Adviser.

Don’ts for Investors

1. Do not deal with unregistered entities.

2. Don’t fall for stock tips offered under the pretext of investment advice.

3. Do not give your money for investment to the Investment Adviser.

4. Don’t fall for the promise of indicative or exorbitant or assured returns by the Investment Advisers. Don’t let greed overcome rational investment decisions.

5. Don’t get carried away by luring advertisements or market rumours.

6. Avoid doing transactions only on the basis of phone calls or messages from any Investment Adviser or its representatives.

7. Don’t take decisions just because of repeated messages and calls by Investment Advisers.

8. Do not fall prey to limited period discount or other incentive, gifts, etc. offered by Investment Adviser.

9. Don’t rush into making investments that do not match your risk taking appetite and investment goals.

Explanation:

R s = 8%+ [1.50* (20%-8%)]

= 8%+ [1.50* 12%]

= 8%+ 18% = 26%

Explanation:

In India, a public issue can be kept open for a maximum of 10 working days as per regulations set by the Securities and Exchange Board of India (SEBI). This time frame allows investors sufficient opportunity to consider the offer and make their investment decisions. It also ensures that the process is transparent and fair for all investors.

Explanation:

In a non-discretionary Portfolio Management Service (PMS), the portfolio manager does not have the authority to make investment decisions on behalf of the investor. Instead, the investor retains full control and responsibility for decision-making. The portfolio manager’s role is to provide support, advice, and execution facilities to the investor based on their preferences and objectives.

Explanation:

Transmission of shares refers to the process of transferring shares to the legal heirs or beneficiaries of a deceased shareholder. When the original holder of shares passes away, the shares need to be transferred to the rightful inheritors. This process involves legal procedures and documentation to ensure the smooth transfer of ownership from the deceased shareholder to the heirs or beneficiaries.

Explanation:

Investment in a government security issued at a fixed interest rate is subject to interest rate risk. Interest rate risk refers to the risk that the value of the investment will fluctuate due to changes in interest rates. When interest rates rise, the value of fixed-rate securities decreases because investors can earn higher returns elsewhere. Conversely, when interest rates fall, the value of fixed-rate securities increases. Therefore, investors in government securities are exposed to the risk of fluctuations in their investment’s value due to changes in interest rates

Explanation:

Category III Alternative Investment Funds (AIFs) are permitted to take leverage positions through various sophisticated strategies such as futures and options (F&O) contracts, structured products, margin trading, and arbitrage strategies. These funds are designed for investors seeking higher returns by actively engaging in complex trading strategies. Category III AIFs typically involve higher risk levels compared to other categories of AIFs and are suitable for sophisticated investors who are willing to accept higher levels of risk in pursuit of potentially higher returns.

Explanation:

Inflation or the decrease in purchasing power over time erodes the value of money. Therefore, cash flows received in the future are worth less in real terms due to inflation. This is because the same amount of money will buy fewer goods and services in the future than it does today. As a result, investors need to consider the impact of inflation on the present value of future cash flows when making investment decisions.

Explanation:

An option, which gives the buyer/holder a right to buy the underlying asset, is called a çall option; and an option which gives the buyer/holder a right to sell the underlying asset, is called a ’put option’.

Explanation:

NFOs (New Fund Offers) other than ELSS (Equity Linked Savings Scheme) can be open for a maximum of 15 days. This duration allows investors sufficient time to study the offer document, understand the investment objective and strategy of the fund, and make informed investment decisions. It also provides ample time for investors to submit their applications before the NFO closes.

Explanation:

In an Initial Public Offer (IPO) of shares, the mode of payment that is mandatory is “Application supported by blocked amount.” This means that investors need to submit their applications along with a cheque or demand draft for the total amount payable for the subscribed shares. However, the amount mentioned in the cheque or demand draft is not immediately debited from the investor’s account. Instead, it is kept blocked until the shares are allotted. If the shares are allotted, the amount is then debited, and if not, it is released back to the investor. This process ensures that the funds are available for payment if the shares are allotted.

Explanation:

Large Cap Funds typically invest in large-cap companies, which are those with the highest market capitalization. Market capitalization refers to the total value of a company’s outstanding shares in the stock market. These funds usually target companies ranked within the top 100 in terms of market capitalization as per the list of stocks prepared by the Association of Mutual Funds in India (AMFI). Investing in large-cap companies is considered less risky compared to mid-cap or small-cap companies, making Large Cap Funds suitable for investors seeking stable returns with lower risk exposure.

Explanation:

Reinvestment risk refers to the risk that occurs when an investor reinvests the proceeds from an investment, such as a fixed deposit, at a lower interest rate than the original investment. In a falling interest rate scenario, Anita may face the challenge of reinvesting her funds from maturing fixed deposits into new ones at lower interest rates. This could lead to lower returns on her investments over time, potentially impacting her overall investment income. As a conservative investor relying on fixed deposits, reinvestment risk becomes a significant concern for Anita, as it can affect the stability and growth of her investment portfolio.

Explanation:

Asset allocation is the process of distributing an investor’s wealth among different asset classes such as stocks, bonds, real estate, and cash equivalents, based on their financial goals, risk tolerance, and investment horizon. This strategy aims to optimize the risk-return trade-off by diversifying investments across various asset classes that have different levels of risk and return potential. Asset allocation plays a crucial role in investment management as it helps investors achieve their financial objectives while managing risk effectively.

Explanation:

Weight           Expected Return         Weight X Expected Return
25%                               12%                                0.03
50%                               10%                                0.05
25%                                16%                                0.04
Total = 0.12

Explanation:

Explanation:

Any person aggrieved by any decision or order of the Securities Appellate Tribunal may file an appeal to the Supreme Court within 60 days from the date of communication of the decisions or order of the SAT to him.

Explanation:

The Department of Financial Services administers government policies related to pension reforms because it oversees matters related to banking, insurance, and pension sectors, including the implementation of pension schemes and reforms aimed at improving the pension system.

Explanation:

The statement of account is to be sent to investors within 5 days of NFO closure to provide them with a comprehensive summary of their investment transactions and holdings during the initial offering period. This allows investors to review their investments and ensure accuracy in their records in a timely manner.

Explanation:

Systematic risk, also known as market risk, cannot be diversified away by holding a diversified portfolio of assets. This risk is inherent in the overall market and affects all investments to some degree. Examples include economic factors, political events, interest rate changes, and market volatility, which impact the entire market rather than specific assets or sectors. Unsystematic risk, on the other hand, can be mitigated through diversification by spreading investments across different assets or sectors.

Explanation:

Stock exchanges impose price bands on individual securities to limit volatility in prices.

Daily price bands applicable on securities are as follows:

– Daily price bands on 2%, 5% or 10% either way on securities as specified by the exchange.

– No price bands are applicable on scrips on which derivatives products are traded

– Price bands of 20% either way on all remaining scrips.

Explanation:

The price-to-earnings (P/E) ratio is calculated by dividing the current market price of a stock by its earnings per share (EPS). This ratio indicates the valuation of a company’s stock relative to its earnings. A higher P/E ratio suggests that investors are willing to pay more for each unit of earnings, indicating that the stock may be overvalued. Conversely, a lower P/E ratio may suggest that the stock is undervalued. Therefore, the correct formula for calculating the P/E ratio is option c) Current price of stock / Earnings Per Share (EPS).

Explanation:

Stock exchanges impose price bands on individual securities to limit volatility in prices.

Daily price bands applicable on securities are as follows:

– Daily price bands on 2%, 5% or 10% either way on securities as specified by the exchange.

– No price bands are applicable on scrips on which derivatives products are

– Price bands of 20% either way on all remaining scrips.

Explanation:

SEBI (Securities and Exchange Board of India) primarily regulates and oversees the securities market in India. While it addresses various investor grievances and complaints, certain issues fall outside its purview.

In the case of a company declaring no dividend on equity for the fourth consecutive year, SEBI typically doesn’t intervene because the declaration of dividends is a corporate governance matter and falls within the purview of the company’s management and its shareholders. SEBI’s jurisdiction primarily concerns market integrity, transparency, and investor protection, rather than mandating dividend payouts by companies. Therefore, this issue would not be entertained by SEBI.

Explanation:

In the context of Portfolio Management Services (PMS), the appointment of a Compliance Officer is mandatory. This individual is responsible for ensuring that the operations of the PMS adhere to all regulatory guidelines, laws, and internal policies. The Compliance Officer plays a crucial role in overseeing the firm’s compliance framework, monitoring activities, conducting audits, and implementing necessary measures to mitigate regulatory risks. This ensures that the PMS provider operates within the legal and regulatory framework, thereby safeguarding the interests of investors and maintaining market integrity.

Explanation:

Reinvestment risk is the correct answer. This risk arises because the income generated from an investment, typically received as coupon payments, may need to be reinvested at a lower interest rate than the original investment. As a result, the investor may not be able to achieve the same level of returns as initially anticipated, leading to a potential decrease in overall investment performance. This risk is particularly relevant in scenarios where interest rates decline over time, impacting the reinvestment opportunities for income generated from the investment.

Explanation:

Globally, the Alternative investment industry has evolved over time, hence there is no uniform classification or limitation as to what constitutes such assets. Alternative investments are therefore defined generally by several sources as investments other than traditional investments.

An alternative investment is a financial asset that does not fall into one of the conventional investment categories. Conventional categories include stocks, bonds, and cash, purchase of general categories of mutual fund units and Exchange Traded Funds (ETFs). Traditional investments cater to general investors who seek investment options which provide better returns than mere savings schemes.

Explanation:

Risk Profiling : It is mandatory for an Investment adviser to undertake the process of risk profiling of the investor. This gives an idea about the position of the investor and the kind of risk that they are able to take. Risk profiling becomes the basis for the selection of various investment options for the investor. This is a requirement that the investment adviser should never miss out on and it should be made a part of the overall process.

Explanation:

A financial goal is a specific, measurable objective that an individual or entity aims to achieve within a defined period. In this case, funding a child’s education within 10 years with Rs.10 lakh is a clear and tangible financial goal. It specifies the purpose (child’s education), the timeline (10 years), and the required amount (Rs.10 lakh). This goal provides a concrete target for financial planning and guides investment decisions to meet the specified objective within the given timeframe.

Explanation:

Arbitrage involves taking advantage of price differences for the same asset or security in different markets or at different times. Traders exploit these discrepancies to make a risk-free profit by simultaneously buying and selling the asset at different prices. This process helps to ensure that prices in different markets remain aligned and efficient. Arbitrage opportunities arise due to market inefficiencies, temporary imbalances in supply and demand, or delays in information dissemination. By quickly capitalizing on these opportunities, arbitrageurs contribute to price efficiency in financial markets.

Explanation:

All primary market issues are not necessarily public issues. While public issues involve the sale of securities to the general public, there are other types of primary market issues as well. For instance, private placements involve the sale of securities to a select group of investors without offering them to the public at large. Additionally, rights issues involve the sale of securities to existing shareholders based on their pre-existing ownership stake in the company. Therefore, not all primary market issues are public issues, making the statement false.

Explanation:

=IRR({-10000,7000,0,6240}) = 16.21%

Explanation:

Investment Advisers are fiduciaries, which means that they have to act in the best interest of their clients. This is the central part of the entire fiduciary responsibility of the Investment Advisers.

There are chances that several conflicts of interest may arise during the course of their work but the fiduciary responsibility is to rise above all this and ensure that the client is always put at the forefront of any step that has been taken

Explanation:

ASBA is a mechanism introduced by SEBI for applying to public issues wherein the application money remains blocked in the applicant’s bank account until the shares are allotted. This helps prevent misuse of funds and ensures that funds are available for allotment when needed. Other modes like cash and post-dated cheques are not typically accepted for public issue payments due to various regulatory and security concerns. Therefore, ASBA is the preferred and accepted mode for making payments in public issues.

Explanation:

elf-Regulatory Organizations (SROs) are industry associations or bodies formed by participants within a specific sector or industry to regulate themselves. Their primary responsibility is to establish and enforce rules and regulations governing the conduct of their members. This includes setting standards for professional behavior, monitoring compliance with these standards, and taking disciplinary actions against members who violate the rules. SROs play a crucial role in maintaining market integrity, protecting investors, and ensuring fair and orderly functioning of the industry they represent.

Explanation:

IRDAI is the regulatory body responsible for overseeing and regulating the insurance sector in India. It formulates and enforces guidelines and norms for insurance companies, including regulations related to the investment of funds. These norms dictate the permissible avenues for investment, asset allocation limits, risk management practices, and other investment-related guidelines to ensure the safety and security of policyholders’ funds. While RBI and SEBI play roles in regulating financial markets, including certain aspects of investments, IRDAI specifically focuses on regulating the insurance industry and governing the investment activities of insurance companies.

Explanation:

When the correlation is +1

Portfolio Variance = 0.52*0.22+ 0.52*0.102+2 *0.5 *0.5* Cov (a, b)

= 0.25*0.04 +0.25*0.01+2 *0.25 *1*0.2*0.1

= 0.0100 +0.0025 +2 *0.25 *1*0.02

= 0.0100 +0.0025 +0.0100

Portfolio Variance =0.0225

Portfolio Risk (Standard Deviation) = Square root of (Portfolio Variance) = 0.15

Explanation:

The maturity period for a Public Provident Fund (PPF) account is 15 years from the end of the financial year in which the account was opened. Since the PPF account was opened on 1-4-2007, the maturity date will be 15 years from the end of the financial year 2006-2007, which is 31st March 2023. Therefore, the correct maturity date is 04/01/2023.

Explanation:

• Derivatives markets aid in enhancing price discovery by incorporating actual valuations and market expectations.

• They facilitate the transfer of different risks from entities with low risk tolerance to those with higher risk appetite.

• Derivatives markets also help in channeling speculative activities from unorganized markets to organized ones, promoting market efficiency and transparency.

Explanation:

• An efficient portfolio is one that offers either the highest expected return for a given level of risk or the lowest level of risk for a given expected return.

• So, an efficient portfolio is characterized by either having no other portfolio with higher expected returns at the same level of risk (option a) or no other portfolio with lower risk at the same expected return (option b).

Explanation:

Sure, here’s the explanation in a narrative format:

Exchange Traded Funds (ETFs) are financial instruments that track the performance of a particular index, commodity, or basket of assets. They are traded on stock exchanges, and investors can buy and sell them through stockbrokers. Therefore, ETFs can be bought through a stockbroker.

Explanation:

Portfolio Management Services (PMS) is a professional service provided by portfolio managers who manage the investments of high-net-worth individuals (HNIs) based on their specific financial goals and risk tolerance. PMS is most suitable for investors with a substantial investible capital, typically Rs 50 lakhs or more, as they can benefit from personalized investment solutions tailored to their needs. Additionally, investors who prefer having a dedicated portfolio manager overseeing their investments find PMS advantageous. Therefore, all the options listed – having a significant investible capital, seeking personalized investment solutions, and desiring a dedicated portfolio manager – make PMS suitable for such investors.

Explanation:

In a fund of fund (FoF), the portfolio consists of units of other schemes rather than individual securities like debt, equity, or derivatives. FoFs invest in a diversified portfolio of other mutual fund schemes, allowing investors to gain exposure to a variety of asset classes and investment strategies through a single investment vehicle. This structure provides diversification benefits and allows investors to access the expertise of multiple fund managers across different asset classes.

Explanation:

Yes, investors can appoint a nominee for their investment in units of a mutual fund. This can be done by individuals applying or holding units singly or jointly. By appointing a nominee, investors ensure that in the event of their demise, the designated nominee will receive the units of the mutual fund, thus facilitating the smooth transfer of assets and avoiding potential legal complications.

Explanation:

SEBI has categorised the open-end solution oriented schemes as follows:

– Retirement Fund are schemes oriented towards saving for retirement. Schemes will have a lock-in for at least 5 years or till retirement age whichever is earlier.

– Children’s Fund are schemes oriented towards saving for children’s needs. Schemes will have a lock-in of 5 years or till the age of majority whichever is earlier.

Explanation:

Capital Protection Oriented Schemes are typically closed-ended. In these schemes, the fund manager aims to protect the capital invested by investors while providing them with returns linked to the performance of the underlying assets. By being closed-ended, these schemes have a fixed maturity period, and investors typically cannot redeem their investment before the scheme’s maturity. This structure allows fund managers to manage the portfolio with a predetermined investment horizon, aligning with the scheme’s objective of capital protection.

Explanation:

Equity shares represent ownership in a company, providing shareholders with certain rights such as voting rights in company decisions and participation in profits through dividends. Unlike bonds or commercial papers, which are debt instruments, equity shares represent a form of ownership stake in the company.

Explanation:

The Integrated Grievance Management System (IGMS) is a centralized web-based platform developed by regulatory authorities, primarily aimed at addressing and resolving complaints related to insurance. It provides a streamlined process for investors and policyholders to register their grievances and seek resolution effectively.

Explanation:

Arbitrage funds aim to capitalize on the price differences (arbitrage opportunities) between the cash (spot) and derivatives markets. They exploit these price differentials by buying in one market and selling in another, thus profiting from the temporary mispricing of assets

Explanation:

The statement is false because there is an inverse relationship between a bond’s yield to maturity (YTM) and its duration. As the YTM decreases, the bond’s duration typically increases, and vice versa. This relationship exists because a lower YTM implies that the bond’s cash flows are discounted at a lower rate, leading to a higher sensitivity of the bond’s price to changes in interest rates, which is reflected in its duration.

Explanation:

For a conservative investor with a short investment horizon of 3 years and a goal of accumulating Rs.20 lakhs, bank deposits and good quality bonds would be appropriate options. These investments offer relatively lower risk compared to shares or property, providing stability and preserving capital over the short term, aligning with the investor’s risk tolerance and time horizon.

Explanation:

A Social Venture Fund is indeed an Alternative Investment Fund (AIF) investing primarily in securities or units of social ventures. Social ventures typically refer to organizations such as trusts, societies, or companies formed for promoting social welfare. Therefore, both statements (a) and (b) accurately describe key characteristics of a Social Venture Fund.

Explanation:

The coupon rate of a debt instrument remains fixed throughout its tenure and does not change on a daily basis. It is the annual interest rate paid by the issuer to the bondholder, determined at the time of issuance, and remains constant irrespective of changes in market conditions or the bond’s price. On the other hand, the time to maturity, yield, and price of the debt instrument may fluctuate daily based on various factors such as market interest rates, credit risk, and supply and demand dynamics.

Explanation:

The Prevention of Money Laundering Act (PMLA) applies to all intermediaries associated with the securities market. Intermediaries in the securities market include entities such as brokers, depository participants, merchant bankers, portfolio managers, and other entities involved in facilitating transactions or providing services related to securities. PMLA imposes obligations on these intermediaries to implement robust anti-money laundering (AML) and know your customer (KYC) measures to prevent the laundering of illicit funds through the securities market.

Explanation:

=RATE(7,0,-4000,4985)=3.19%

So yearly rate is approx 6.4%

where 7 is the number of Half Years since Compounding is done on Half Yearly basis

4000 is the investment and 4985 is the maturity

Explanation:

As per IRDA (Insurance Regulatory and Development Authority) regulations, IGMS (Integrated Grievance Management System) should be mandatory set up by all insurers. IGMS is a centralized grievance redressal system aimed at providing policyholders with a streamlined and efficient mechanism to register and resolve their complaints and grievances related to insurance products and services. By mandating all insurers to implement IGMS, IRDA aims to enhance transparency, accountability, and customer satisfaction within the insurance sector.

Explanation:

Seller of an option is said to be “short the option”. As described above, he/she would have an obligation but no right with regard to selling/buying the underlying asset in the contract. When you are short (i.e., the writer of) an equity option contract:

– Your maximum profit is the premium received.

– You can be assigned an exercised option any time during the life of option contract (in case of American options).

– Your potential loss is theoretically unlimited

Explanation:

Asset allocation is indeed primarily aimed at risk management. By diversifying investments across different asset classes such as stocks, bonds, real estate, and cash equivalents, investors seek to spread risk and reduce the impact of adverse events on their overall portfolio. This strategic approach helps investors achieve a balance between risk and return based on their financial goals, investment horizon, and risk tolerance. Therefore, asset allocation plays a crucial role in managing risk within an investment portfolio.

Explanation:

SEBI, the Securities and Exchange Board of India, primarily regulates capital markets and protects the interests of investors. However, the declaration of dividends by a company is a corporate decision and falls under the purview of company law rather than securities regulation. SEBI typically does not intervene in matters related to dividend declarations unless there is a violation of securities laws or regulations. Therefore, investor complaints regarding a company’s dividend policy would not typically be entertained by SEBI unless there is an associated violation of securities regulations.

Explanation:

In the context of Portfolio Management Services (PMS), compliance with regulatory requirements is crucial to ensure the protection of investor interests and adherence to applicable laws and guidelines. Therefore, PMS providers are required to appoint a Compliance Officer who oversees and ensures that all activities conducted by the PMS adhere to regulatory standards and compliance frameworks. This officer plays a key role in implementing and monitoring compliance policies and procedures, conducting internal audits, and addressing any regulatory issues or concerns that may arise.

Explanation:

Re-investment risk refers to the uncertainty associated with the reinvestment of cash flows, such as coupon payments, received from an investment at prevailing interest rates. This risk arises because the investor may not be able to reinvest the cash flows at the same interest rate as the original investment, especially if interest rates have declined. As a result, the total return on the investment may be lower than anticipated, impacting the overall performance of the investment.

Explanation:

Globally, the Alternative investment industry has evolved over time, hence there is no uniform classification or limitation as to what constitutes such assets. Alternative investments are therefore defined generally by several sources as investments other than traditional investments.

An alternative investment is a financial asset that does not fall into one of the conventional investment categories. Conventional categories include stocks, bonds, and cash, purchase of general categories of mutual fund units and Exchange Traded Funds (ETFs). Traditional investments cater to general investors who seek investment options which provide better returns than mere savings schemes.

Explanation:

Risk Profiling : It is mandatory for an Investment adviser to undertake the process of risk profiling of the investor. This gives an idea about the position of the investor and the kind of risk that they are able to take. Risk profiling becomes the basis for the selection of various investment options for the investor. This is a requirement that the investment adviser should never miss out on and it should be made a part of the overall process.

Explanation:

A financial goal is a specific target or objective that an individual sets to achieve through financial planning. It typically involves a desired outcome that requires financial resources to accomplish. In this case, “Funding child’s education in 10 years with Rs.10 lakh” is a specific financial goal that requires saving and investing a certain amount of money over a defined period to meet the educational expenses of the child.

Explanation:

Arbitrage involves taking advantage of price differences for the same asset or security in different markets or at different times. Traders or investors engage in arbitrage to profit from inefficiencies in the market by buying low in one market and selling high in another market simultaneously, thus exploiting price anomalies. Arbitrage helps in bringing prices of the same asset in different markets closer together and contributes to market efficiency.

Explanation:

All primary market issues need not be public issues. While public issues involve offering securities to the general public, there are other types of primary market issues such as private placements, rights issues, and preferential allotments that are not offered to the general public but to specific groups of investors or existing shareholders of the company. Therefore, not all primary market issues are public issues.

Explanation:

=IRR({-10000,7000,0,6240}) = 16.21%

Explanation:

Investment Advisers are fiduciaries, which means that they have to act in the best interest of their clients. This is the central part of the entire fiduciary responsibility of the Investment Advisers.

There are chances that several conflicts of interest may arise during the course of their work but the fiduciary responsibility is to rise above all this and ensure that the client is always put at the forefront of any step that has been taken

Explanation:

ASBA (Application Supported by Blocked Amount) is a mechanism introduced by SEBI (Securities and Exchange Board of India) that allows investors to apply for shares in public issues without actually transferring the funds at the time of application. Instead, the application amount is blocked in the investor’s bank account, ensuring that the required funds are available for allotment if the application is successful. This mechanism provides greater convenience and security for investors participating in public issues. Therefore, payment for a public issue can be made through ASBA.

Explanation:

SRO stands for Self-Regulatory Organization. The prime responsibility of an SRO is to regulate its own members, ensuring compliance with industry regulations, ethical standards, and best practices. SROs typically establish and enforce rules and standards for their members’ conduct, oversee market activities, and provide mechanisms for resolving disputes and disciplinary actions. By regulating their own members, SROs contribute to maintaining market integrity, protecting investors, and promoting fair and orderly markets.

Explanation:

Insurance companies invest their funds in various financial instruments, and the norms governing these investments are laid down by the Insurance Regulatory and Development Authority of India (IRDAI). IRDAI is the regulatory body responsible for overseeing and regulating the insurance sector in India. It formulates investment guidelines and regulations to ensure the safety, security, and prudence of investments made by insurance companies, thereby safeguarding the interests of policyholders and maintaining the stability of the insurance industry.

Explanation:

When the correlation is +1

Portfolio Variance = 0.52*0.22+ 0.52*0.102+2 *0.5 *0.5* Cov (a, b)

= 0.25*0.04 +0.25*0.01+2 *0.25 *1*0.2*0.1

= 0.0100 +0.0025 +2 *0.25 *1*0.02

= 0.0100 +0.0025 +0.0100

Portfolio Variance =0.0225

Portfolio Risk (Standard Deviation) = Square root of (Portfolio Variance) = 0.15

Explanation:

The Public Provident Fund (PPF) has a maturity period of 15 years. Since the PPF account was opened on 1-4-2007, it will mature after 15 years from the opening date, which is 04/01/2023. Therefore, the maturity date for the PPF account is 04/01/2023.

Explanation:

a) The derivatives market aids in improving price discovery by incorporating actual valuations and market expectations, leading to more accurate pricing of underlying assets. b) It facilitates the transfer of risks from entities with low risk tolerance to those with higher risk appetite, thereby helping in risk management. c) By providing a regulated and organized platform for speculative trades, the derivatives market helps in reducing risks associated with unorganized markets and ensures fair and transparent trading practices.

Explanation:

A portfolio is considered efficient if it satisfies both criteria:

a) No other portfolio offers higher expected returns with the same risk. b) No other portfolio offers lower risk with the same expected return.

This implies that the portfolio is optimized in terms of risk and return, offering the best possible trade-off between the two factors.

Explanation:

Units of Exchange Traded Funds (ETFs) can be bought through a stock broker because ETFs trade on stock exchanges, just like individual stocks. Therefore, investors can purchase ETF units through their stock brokers in a similar manner to buying stocks.

Explanation:

Portfolio Management Services (PMS) is most suitable for investors with an investible capital of Rs 50 lakhs or more, as they typically offer personalized investment solutions tailored to the individual investor’s goals and preferences. PMS also provides access to a dedicated portfolio manager who manages the investments on behalf of the investor, making it suitable for those who prefer professional management of their portfolio. Therefore, option (d) is correct, as all of these factors contribute to the suitability of PMS for certain investors.

Explanation:

The Integrated Grievance Management System (IGMS) is designed to address and resolve complaints related to insurance. It provides a platform for policyholders and other stakeholders to lodge complaints regarding various insurance services, such as claim settlement, policy issuance, premium payments, and other related matters. IGMS facilitates the efficient handling and redressal of grievances within the insurance sector, ensuring timely resolution and enhancing customer satisfaction. Therefore, it plays a crucial role in maintaining the integrity and effectiveness of the insurance industry’s complaint resolution process.

Explanation:

In a fund of fund, the portfolio consists of units of other schemes rather than individual securities like debt, equity, or derivatives. Fund of funds invest in a diversified portfolio of mutual funds or exchange-traded funds (ETFs) rather than directly investing in individual stocks or bonds. This allows investors to gain exposure to a broader range of assets and benefit from the expertise of multiple fund managers across different asset classes.

Explanation:

Yes, individuals applying or holding units singly or jointly can nominate a nominee for their investments in mutual funds. This provision allows investors to specify who will receive the units of the mutual fund in case of their demise, providing clarity and ensuring a smooth transfer of assets to the nominee.

Explanation:

SEBI has categorized the open-end solution oriented schemes as follows:

– Retirement Fund are schemes oriented towards saving for retirement. Schemes will have a lock-in for at least 5 years or till retirement age whichever is earlier.

– Children’s Fund are schemes oriented towards saving for children’s needs. Schemes will have a lock-in of 5 years or till the age of majority whichever is earlier.

Explanation:

Capital Protection Oriented Schemes are typically closed-ended funds. This means that they have a fixed maturity period, and investors can only buy or sell units of the scheme during a specified period at the time of the initial offering. The main objective of these schemes is to protect the invested capital while providing some potential for returns, and the closed-ended structure helps fund managers align their investment strategies with the scheme’s objectives over the defined period.

Explanation:

Equity shares represent ownership in a company, also known as common stock. Holding equity shares entitles the shareholders to participate in the company’s profits through dividends and capital appreciation. Additionally, equity shareholders typically have voting rights in the company’s affairs, including decisions related to corporate governance, such as electing the board of directors. Therefore, equity shares are considered a form of equity ownership in a company, providing both financial benefits and a say in its management. Bonds and commercial papers, on the other hand, represent debt instruments issued by companies and governments and do not offer ownership rights or voting privileges to the holders.