Explanation:

All three options (a, b, and c) are necessary for granting the certificate of registration under Portfolio Managers Regulations 2020.

a) The applicant must be a body corporate. b) The applicant needs the required infrastructure like office space, equipment, and manpower. c) The applicant must appoint a compliance officer.

All these conditions must be met for the certificate of registration to be granted.

Explanation:

Asset allocation refers to the strategic distribution of an investment portfolio among different asset classes such as stocks, bonds, and cash equivalents. This process aims to optimize risk and return by diversifying investments across various categories based on their characteristics, including risk, return potential, and correlation with one another. Therefore, asset allocation involves dividing funds into different asset classes to achieve a balanced and diversified portfolio

Explanation:

Category II Alternative Investment Funds (AIFs) are restricted from undertaking leverage or borrowing except to meet day-to-day operational requirements. This limitation is imposed to ensure that Category II AIFs do not excessively leverage their investments, which could amplify risks. Instead, any borrowing undertaken should be solely for operational needs, rather than for speculative or investment purposes.

Explanation:

Forwards are bilateral agreements where two parties agree to buy or sell an asset at a predetermined price on a specific future date. These contracts are customizable and typically traded over-the-counter (OTC), allowing parties to tailor the terms to their specific needs. Unlike futures, which are standardized contracts traded on exchanges, forwards offer more flexibility in terms of contract terms and settlement arrangements.

Explanation:

E(R_port) = (70% X 5%) + (30% X 12%) = 7.10%

Explanation:

Exchanges control the risk of default on obligations arising out of trading by imposing margins. Margins are funds that traders are required to deposit with the exchange as a security against potential losses. By requiring margins, exchanges ensure that traders have sufficient capital to cover their potential obligations, reducing the risk of default. This mechanism helps maintain market integrity and stability by mitigating the impact of defaults on counterparties and the overall financial system.

Explanation:

A power of attorney grants an individual the authority to act on behalf of another person in legal or financial matters. This authority can encompass a wide range of actions, including managing financial affairs, making legal decisions, or conducting transactions on behalf of the person granting the power of attorney. It is a legal document that outlines the scope and limitations of the authority delegated to the appointed individual, known as the attorney-in-fact or agent.

Explanation:

The value of a derivative security is derived from the value of an underlying asset or assets. Derivatives derive their value from the performance of underlying assets such as stocks, bonds, commodities, currencies, or market indices. Therefore, changes in the value of the underlying assets directly affect the value of the derivative security. This relationship forms the basis of derivatives trading and pricing.

Explanation:

=FV(4.5%,3,0,-10000)=Rs. 11,411.66

Explanation:

The top-down approach involves first scanning the macroeconomic scenario to identify promising industries. Once potential industries are identified, specific companies within those industries are selected for investment. This approach begins with a broad analysis of economic and market conditions before narrowing down to individual investment opportunities. In contrast, the bottom-up approach starts with analyzing individual companies and their fundamentals without considering broader economic factors initially.

Explanation:

Investing through mutual funds offers benefits such as risk reduction through diversification, professional investment management, and convenience in transactions and record-keeping. Therefore, the correct answer is d) All the above.

Explanation:

Credit risk refers to the risk of default by the issuer of a security, leading to a loss of principal or interest payments. In this scenario, the migration of the security’s rating from A+ to A indicates a downgrade in the creditworthiness of the issuer. This downgrade increases the likelihood of default, thereby exposing the investor to credit risk.

Explanation:

SEBI, the Securities and Exchange Board of India, regulates and oversees activities related to securities markets in India. However, the non-payment of bonuses by insurance companies falls under the purview of the Insurance Regulatory and Development Authority of India (IRDAI), not SEBI. SEBI primarily deals with matters related to securities markets, including mutual funds, brokers, and listed companies, as mentioned in options a), b), and c).

Explanation:

Offer for Sale (OFS) is a method of share sale where existing shareholders, typically promoters or institutional investors, sell their shares to the public through the stock exchange platform. This method is commonly used by listed companies to divest their shares and provide liquidity to existing shareholders. Therefore, OFS is primarily used by listed companies.

Explanation:

Art is characterized by its uniqueness and lack of standardization. Unlike mass-produced goods, each piece of art is typically unique and original, whether it’s a painting, sculpture, or any other form of artistic expression. This uniqueness is a fundamental feature of art and distinguishes it from standardized products.

Explanation:

Public limited companies are required to make public offers only in dematerialized form if the offer size exceeds Rs. 10 crore. Dematerialization refers to the conversion of physical securities into electronic form, which facilitates trading and reduces the risks associated with paper-based certificates. This requirement aims to promote transparency, efficiency, and investor protection in the securities market.

Explanation:

A high price to book value (P/B) ratio suggests that the market price of a company’s shares is high relative to its book value per share. The book value per share represents the value of a company’s assets minus its liabilities, divided by the number of outstanding shares.

If the P/B ratio is high, it typically indicates that investors are willing to pay a premium for the company’s assets, possibly due to high expectations for future growth or a strong market sentiment. However, it also suggests that the stock may be overvalued compared to its intrinsic value, leading to a higher risk of price correction in the future. Therefore, a high P/B ratio often indicates that the company’s shares are overvalued.

Explanation:

In the Blizzard approach to repaying debt, the lowest amount of debt is paid off first, which provides a motivational boost to the debtor. After paying off the smallest debt, the strategy shifts to paying off the debt with the highest interest rate. This approach combines elements of both the Snowball and Avalanche methods, aiming to provide psychological encouragement while also minimizing overall interest costs in the long run.

Explanation:

Corporate bonds with high credit ratings typically have lower default risk. Credit ratings reflect the issuer’s ability to meet its debt obligations. Bonds with higher credit ratings are considered less risky because the issuer has a strong financial position and is less likely to default on its payments. Therefore, corporate bonds with high credit ratings tend to offer lower yields (coupon rates) compared to lower-rated bonds to compensate investors for the lower risk. Additionally, the face value of a bond is typically fixed and does not directly correlate with its credit rating.

Explanation:

Annualization of returns allows for the comparison of returns over different investment horizons by converting returns from shorter periods (such as monthly or quarterly) into annualized figures. This enables investors to evaluate and compare investment performance over various timeframes, facilitating informed decision-making regarding investment choices and strategies.

Explanation:

Equity Linked Savings Schemes (ELSS) are a type of mutual fund scheme that offers tax benefits under Section 80C of the Income Tax Act in India. ELSS funds are required to invest at least 80% of their total assets in equity and equity-related instruments. This high equity allocation aims to provide investors with exposure to the potential returns of the stock market while also offering tax-saving benefits.

Explanation:

A hedger enters into derivatives contracts to mitigate the risk of adverse price fluctuations in existing positions. By using derivatives such as futures or options, hedgers can protect themselves against potential losses resulting from price movements in the underlying asset. This strategy is commonly employed by businesses or investors who hold assets that are exposed to market risks and seek to minimize their impact on their overall portfolio or operations.

Explanation:

Asset allocation is the process of distributing an investor’s wealth among various asset classes such as stocks, bonds, real estate, and cash equivalents. This strategic allocation aims to optimize the risk-return profile of the investment portfolio based on the investor’s financial goals, risk tolerance, and time horizon. Asset allocation plays a crucial role in portfolio diversification and risk management, as it helps spread investment risk across different asset classes and potentially enhances long-term returns.

Explanation:

The Pension Fund Regulatory and Development Authority (PFRDA) was established with the primary responsibility of promoting old age income security by establishing, developing, and regulating pension funds in India. PFRDA regulates and supervises pension funds, ensuring transparency, efficiency, and fairness in the pension sector. It aims to expand pension coverage and encourage pension savings among individuals to provide financial security during retirement.

Explanation:

Real estate is highly illiquid compared to other investment options such as government securities, exchange-traded funds (ETFs), and gold. Real estate investments typically require significant capital outlay and involve a lengthy process to buy or sell properties. Additionally, the real estate market can experience periods of low liquidity, making it challenging to quickly convert real estate assets into cash without incurring substantial transaction costs or delays. Therefore, real estate investments generally require large investments and are less liquid compared to other asset classes.

Explanation:

Retail investors are typically individuals who invest smaller amounts compared to institutional investors. In a single IPO (Initial Public Offering) transaction, retail investors are allowed to invest up to Rs. 2 lakhs. This limit is set to ensure fair access to IPO shares for individual investors and to prevent large investors from dominating the IPO allocation process.

Explanation:

The asset allocation of an investor should ideally be aligned to their return requirement, risk preference, and financial goals because these factors collectively determine the appropriate mix of assets in their portfolio for achieving desired outcomes.

Explanation:

Regulation 15EB of SEBI Act 1992, provides that if an investment adviser fails to comply with the regulations made by SEBI or directions issued by SEBI, such investment adviser shall be liable to penalty which shall not be less than Rs.1 lakh but which may extend to Rs. 1 lakh for each day during which such failure continues subject to a maximum of Rs.1 crore.

Explanation:

The correlation coefficient is obtained by dividing the covariance by the product of the individual standard deviations.

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

Correlation = 0.0510 / (0.2041*0.2944) = 0.8488

Explanation:

A humped yield curve occurs when the yields of medium-term bonds are higher than both short-term and long-term yields. This shape indicates that investors expect interest rates to rise in the short term before declining in the long term. It is called “humped” because the curve has a peak at the medium-term maturity point.

Explanation:

The effective annual rate of interest (EAR) is highest when compounding occurs more frequently within a given period. In this case, compounding monthly results in more frequent compounding compared to quarterly or half-yearly compounding. As a result, the investment offering 6% p.a. compounded monthly will have the highest effective annual rate of interest among the options provided.

Explanation:

The portfolio manager has to manage and administer the funds of the investors within the regulatory framework. There are two popular models of execution. First one is pool execution i.e. trading for all clients together and then allocating individual securities to each client’s demat account and the other one is trading in individual client name. In this case, allocation happens automatically since trade is in individual name.

Explanation:

CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) has been authorized by the Government of India to act as the Central KYC (Know Your Customer) Registry. The Central KYC Registry aims to streamline the KYC process for financial institutions by maintaining a central repository of KYC records of customers across various financial institutions in India. This initiative helps reduce duplication of KYC documentation and enhances efficiency in the onboarding process for customers and financial institutions alike.

Explanation:

In a normal yield curve, long-term interest rates are higher than short-term interest rates. This reflects the expectation that investors require higher compensation, or risk premium, for investing in longer-term securities due to the increased risk associated with longer maturities. Therefore, when long-term rates are higher compared to short-term yields due to higher risk premia, it indicates a normal yield curve.

Explanation:

A public issue, such as an Initial Public Offering (IPO), is required to be kept open for a minimum of 3 working days as per the regulations set by the Securities and Exchange Board of India (SEBI). This minimum duration ensures that investors have adequate time to consider the offer and make informed investment decisions.

Explanation:

Covariance of the portfolio = Correlation between A & B X SD of A X SD of B

20 = Correlation coefficient * 6 * 5

Correlation coefficient = 20 / (6*5) = 20/30 = 0.67

Explanation:

A non-discretionary portfolio manager manages the funds in accordance with the directions of the client. This means that the portfolio manager executes trades and makes investment decisions based on specific instructions or guidelines provided by the client. The client retains control and ultimate decision-making authority over the management of their investment portfolio in a non-discretionary arrangement.

Explanation:

Portfolio returns = (Weight of Stock A * Return of Stock A) + (Weight of Stock B * Return of Stock B)

Portfolio return = (0.6 * 9%) + (0.4 * 6%)

Portfolio return = 5.4% + 2.4% = 7.8%

Explanation:

The clearing house/corporation is the counterparty to all trades in the stock exchange. This implies that it assumes counterparty risk completely, by settling all trades even if the trading member defaults on pay-in or pay-out. Some of this counter party risk is managed through the levy of margins. The guaranteed settlement is also ensured through the Core Settlement Guarantee Fund (Core SGF).

Explanation:

Asset allocation is the process of distributing an investor’s wealth among various asset classes such as stocks, bonds, real estate, and cash equivalents. This strategic allocation aims to optimize the risk-return profile of the investment portfolio based on the investor’s financial goals, risk tolerance, and time horizon. Asset allocation plays a crucial role in portfolio diversification and risk management, as it helps spread investment risk across different asset classes and potentially enhances long-term returns.

Explanation:

Treasury Bills (T-Bills) are discounted instruments issued by governments to raise short-term funds. When T-Bills are issued, they are sold at a discount to their face value. The difference between the purchase price and the face value represents the investor’s return, as T-Bills are redeemed at their face value upon maturity. This discounting mechanism allows governments to borrow money at a lower effective interest rate than if they were to issue interest-bearing bonds.

Explanation:

Market capitalization refers to the total value of a company’s outstanding shares in the market. It is calculated by multiplying the number of shares issued by the company by the current market price per share. Market capitalization reflects the market’s valuation of the company and is used to gauge its size, relative importance, and investment attractiveness.

Explanation:

Insider trading is considered an unhealthy practice in the securities markets. It involves buying or selling a security based on material, non-public information about the security. This practice gives insiders an unfair advantage over other investors and undermines the integrity and fairness of the market. Insider trading is illegal in most jurisdictions and is subject to regulatory scrutiny and enforcement measures to maintain market integrity and investor confidence.

Explanation:

Insider trading is considered an unhealthy practice in the securities markets. It involves buying or selling a security based on material, non-public information about the security. This practice gives insiders an unfair advantage over other investors and undermines the integrity and fairness of the market. Insider trading is illegal in most jurisdictions and is subject to regulatory scrutiny and enforcement measures to maintain market integrity and investor confidence.

Explanation:

All of the actions listed – making loan payments on time, avoiding opening multiple new credit card accounts simultaneously, and effectively using credit – help raise or maintain a good credit score.

Explanation:

SEBI Complaints Redress System (SCORES) indeed provides a system for processing investor complaints against listed companies. SCORES is an online platform established by the Securities and Exchange Board of India (SEBI) to facilitate investors in lodging their complaints electronically and track the status of their complaints against listed entities. It aims to enhance transparency, efficiency, and investor protection in the securities market.

Explanation:

Companies can issue securities through methods like IPO, Rights Issue, and Bonus Issue.

Explanation:

KYC (Know Your Customer) requirements for a mutual fund folio need to be completed by all holders except minors. Minors are not legally capable of entering into contracts, including investments, on their own behalf. Therefore, KYC requirements are typically fulfilled by the adult holders of the mutual fund folio, ensuring compliance with regulatory standards and verifying the identities of the investors involved.

Explanation:

The Reserve Bank of India (RBI) is the agency responsible for managing government debt in India. As the central bank of the country, RBI conducts government debt management operations, including issuing government securities, conducting auctions, and managing the government’s borrowing program. These activities help in financing the fiscal deficit and ensuring stability in the government securities market.

Explanation:

Technical analysis attempts to predict future movements of a stock price by analyzing historical price data and volume patterns. It focuses on studying charts, trends, and market indicators to identify patterns and trends that may indicate potential future price movements. Unlike fundamental analysis, which considers factors such as financial statements and company performance, technical analysis relies solely on the historical price and volume data of a stock to make predictions about its future direction.

Explanation:

Standard deviation is indeed a measure of total risk, which encompasses both systematic (market) risk and unsystematic (specific) risk. It measures the dispersion or variability of returns around the average return of an investment. On the other hand, Beta is a measure of systematic risk, specifically market risk. It quantifies the sensitivity of a stock’s returns to changes in the overall market returns. Therefore, Standard Deviation captures total risk, while Beta specifically measures market risk.

Explanation:

An award made by the Insurance Ombudsman will only be binding on the insurer if the complainant (the aggrieved party) accepts this decision. Once the complainant accepts the decision, it becomes binding on the insurer, and they are obligated to comply with the terms of the award. However, if the complainant does not accept the decision, they have the option to pursue further legal recourse, such as approaching the Consumer Forum or seeking redressal through other legal means.

Explanation:

In a P2P (Peer-to-Peer) lending process, the lender is typically an individual. P2P lending platforms connect individual borrowers directly with individual lenders, bypassing traditional financial institutions like banks. Therefore, individuals can act as lenders on these platforms, providing funds to borrowers in exchange for interest payments. This direct lending model enables individuals to participate in lending activities and earn returns on their investments without the intermediary role of banks or financial institutions.

Explanation:

Government securities are considered risk-free or gilt-edged instruments because they carry practically no risk of default. This means there is minimal to no chance that the government will fail to make interest payments or repay the principal amount at maturity. Since governments have the authority to levy taxes and print money, investors perceive government securities as highly secure investments, making them virtually free from default risk. As a result, they are often used as benchmark instruments for pricing other financial assets and are considered safe havens for investors seeking to preserve capital.

Explanation:

Investments made in the NSC VIII issue enjoy tax benefits under section 80C of Income Tax Act, 1961. Accrued interest is taxable, but is it deemed to be reinvested and therefore the interest becomes eligible for Section 80C benefits. There is no tax deducted at source at the time of redeeming the certificate value.

Explanation:

Bonds with higher coupon rates are less sensitive to changes in interest rates compared to bonds with lower coupon rates. When interest rates rise, the prices of bonds with lower coupon rates tend to fall more significantly than those with higher coupon rates because the lower coupon payments become less attractive relative to prevailing market rates.

Therefore, a bond with a higher coupon rate, such as the one with a 10% coupon rate, would possess the least degree of interest rate risk because its higher coupon payments provide a larger buffer against potential declines in bond prices due to rising interest rates.

Explanation:

Taking a position in futures opposite to that in the cash market for protecting cash market holdings is known as hedging. Hedging involves using financial instruments such as futures contracts to offset the risk of adverse price movements in an underlying asset, thereby protecting the value of the cash market holdings. This strategy helps reduce or eliminate potential losses that may arise from unfavorable market conditions, providing a form of insurance against market fluctuations.

Explanation:

The sponsor of an Alternative Investment Fund (AIF) needs to be a ‘fit and proper’ person, as determined by the Securities and Exchange Board of India (SEBI). This requirement ensures that the sponsor has the necessary integrity, financial soundness, and professional competence to effectively manage and oversee the operations of the AIF. Individuals who are convicted of criminal offenses, of unsound mind, or insolvent would not meet the criteria of being ‘fit and proper’ and thus would not be eligible to be the sponsor of an AIF.

Explanation:

Clearing corporations play a crucial role in guaranteeing trades done on the stock exchange. They act as intermediaries between buyers and sellers, ensuring the smooth settlement of transactions. Clearing corporations guarantee the performance of trades, managing risks associated with defaults by either party. They do this by becoming the counterparty to every trade, thus providing assurance to market participants that trades will be completed even if one party fails to fulfill their obligations. This mechanism enhances confidence in the market and facilitates efficient trading.

Explanation:

Performance Linked Fees are charged by Portfolio Management Services (PMS) for maximizing returns for investors. These fees are targets that are set and decided upon when the PMS agreement is signed. They are typically structured to align the interests of the portfolio manager with those of the investors, as the manager’s compensation is directly tied to the performance of the portfolio. Performance Linked Fees are usually calculated based on the profits generated by the portfolio manager above a predetermined benchmark or hurdle rate. This incentivizes the manager to strive for superior investment performance, as they only earn fees when they outperform the agreed-upon target.

Explanation:

Investing in Inflation Indexed Bonds is the easiest way to deal with rising prices because these bonds are specifically designed to provide protection against inflation. The principal value and interest payments of inflation-indexed bonds are adjusted periodically to reflect changes in the underlying inflation rate. Therefore, as prices rise, the value of these bonds increases in line with inflation, helping investors maintain purchasing power and preserve the real value of their investments. Inflation Indexed Bonds provide a hedge against inflation and are suitable for investors seeking protection against rising prices.

Explanation:

Credit risk refers to the risk that a company or individual will be unable to pay the contractual interest or principal on its debt obligations. It arises from the possibility of default or non-payment by the borrower. Credit risk is a significant concern for lenders and investors, as it can result in financial losses and impacts the overall stability of the financial system. Lenders and investors assess credit risk by evaluating factors such as the borrower’s creditworthiness, financial health, and ability to meet debt obligations.

Explanation:

The Department of Economic Affairs formulates and monitors India’s macroeconomic policies, which encompass monetary and fiscal policy, as well as the functioning of the capital market including stock exchanges. It plays a crucial role in managing and regulating various aspects of the economy to promote sustainable growth, price stability, and financial market efficiency. This department is responsible for formulating policies related to economic development, international trade, public finance, and investment promotion, among other areas.

Explanation:

Tactical Asset Allocation is the decision that comes out of calls on the likely behaviour of the market.Taking higher exposure to equities, because of expectations of industry and share markets, is an example of tactical asset allocation call

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:

The maximum deposit limit for a Monthly Income Scheme (MIS) account opened in joint names is Rs.900000. This limit applies to the total deposit amount in the joint MIS account, regardless of the number of account holders. It is important to adhere to this limit to ensure compliance with the rules and regulations set by the postal authorities governing the MIS scheme.

Explanation:

Non-systematic risk, also known as specific risk or diversifiable risk, refers to the risk that is specific to an individual company or industry and can be minimized through diversification across companies. By investing in a diversified portfolio of stocks from different sectors or industries, investors can spread out the risk associated with individual companies. This helps reduce the impact of adverse events or performance fluctuations affecting any single company, thereby lowering the overall risk of the portfolio. Diversification is a fundamental principle of risk management in equity investing.

Explanation:

One of the key risks of Alternative Investment Fund (AIF) investment is illiquidity risk. AIFs often invest in assets that may not be easily liquidated or traded in the market. These assets can include private equity, venture capital, real estate, or distressed securities. As a result, investors in AIFs may face challenges in selling their investments and accessing their capital when needed, especially during times of market stress or economic downturns. Illiquidity risk can lead to difficulties in portfolio management, potential delays in accessing returns, and increased vulnerability to unforeseen financial needs. Therefore, investors should carefully consider the liquidity profile of AIFs before making investment decisions.

Explanation:

Duration can be explained as the payback period of cash flows. It measures the time it takes for an investment to recover its initial cost through the cash flows it generates. Duration is commonly used in capital budgeting and investment analysis to evaluate the time it takes for an investment to break even or recoup its initial outlay. It provides insights into the risk and return profile of investments and helps investors assess the timing and magnitude of cash flows associated with an investment opportunity.

Explanation:

The saying “Rs 100 today is better than Rs 100 tomorrow” arises due to the principle of Time Value of Money (TVM). TVM asserts that a rupee received today is worth more than a rupee received in the future. This is because money has the potential to earn returns over time through investments or interest, making a present rupee more valuable than a future one. Additionally, there is inherent uncertainty associated with receiving money in the future, such as inflation or changes in economic conditions, which further diminishes its value. Therefore, the concept of TVM emphasizes the importance of considering the timing of cash flows when making financial decisions.

Explanation:

Re-investment risk arises from the fact that income flows received from an investment at the coupon rate may not be able to earn the same interest. When interest rates decline, the reinvestment of coupon payments or cash flows may yield lower returns than the original coupon rate, leading to a reduction in overall investment returns. This risk is particularly relevant for fixed-income securities such as bonds, where coupon payments are fixed at issuance but may need to be reinvested at prevailing lower interest rates in the future. Reinvestment risk affects the potential income generated from an investment and can impact the overall performance of a portfolio.

Explanation:

The Treynor Ratio is a risk-adjusted measure used to compare the risk premium per unit of systematic risk borne by a fund. It is calculated by dividing the excess return of the portfolio (return above the risk-free rate) by the portfolio’s beta, which measures its systematic risk or correlation with the market. The Treynor Ratio helps investors assess whether the fund’s returns are commensurate with the level of systematic risk it undertakes. A higher Treynor Ratio indicates that the fund is generating higher returns relative to its systematic risk, making it a desirable measure for evaluating portfolio performance in relation to market risk.

Explanation:

Required return = Rf + B (Rm – Rf)

Required return = 8% + 0.7 (14%-8%)

Explanation:

Category I Alternative Investment Funds (AIFs) typically invest in start-up or early stage ventures, social ventures, SMEs (Small and Medium Enterprises), infrastructure projects, or other sectors or areas that the government or regulators consider socially or economically desirable. These funds are aimed at providing capital to enterprises or projects that have the potential for high growth and societal impact but may face challenges in accessing traditional sources of financing. Category I AIFs are focused on investments that contribute to economic development, job creation, innovation, and social welfare, aligning with the objectives of policymakers and regulators.

Explanation:

he future value of an investment is influenced by both the time period for which the investment is held and the rate of return earned on the investment.

• Time period: The longer the investment is held, the greater the future value due to the effect of compounding. Compounding allows the investment to grow over time, as returns are reinvested and generate additional returns.

• Rate of return: A higher rate of return will result in a greater future value of the investment, as the investment grows at a faster pace. A higher rate of return accelerates the compounding effect, leading to a larger accumulation of wealth over time.

Therefore, both the time period and the rate of return are key factors that influence the future value of an investment.

Explanation:

Securities markets provide liquidity, facilitate capital formation, and act as economic indicators.

Explanation:

CRISIL AAA rating indicates that the instruments carry the lowest credit risk. This rating is the highest credit rating assigned by CRISIL, indicating a very strong ability of the issuer to meet its financial obligations. Investors typically consider instruments with a CRISIL AAA rating as highly secure investments with minimal risk of default. Therefore, this rating signifies the highest level of creditworthiness and the lowest credit risk associated with the rated instruments.

Explanation:

Under the advisory model of Portfolio Management Services (PMS), the execution of investment decisions has to be done by the client. In this model, the PMS advisor provides investment advice and recommendations to the client based on their financial goals, risk tolerance, and investment preferences. However, the client retains full control over the execution of these recommendations, including the buying and selling of securities within their portfolio. This allows the client to actively participate in the investment process while benefiting from the expertise and guidance of the PMS advisor.

Explanation:

A personal loan is an unsecured loan, meaning it is not backed by collateral such as a house, car, or other assets. Instead, personal loans are typically granted based on the borrower’s creditworthiness, income, and repayment capacity. Since there is no collateral involved, lenders rely solely on the borrower’s credit history and financial profile to determine eligibility and loan terms. In contrast, home loans, car loans, and gold loans are secured loans where the respective assets (home, car, or gold) act as collateral to secure the loan.

Explanation:

Bond prices behave inversely with interest rates. When interest rates rise, bond prices generally fall, and vice versa. This inverse relationship exists because bond prices and interest rates have an inverse mathematical relationship: as interest rates increase, the present value of future cash flows from a bond decreases, leading to a decrease in bond prices. Conversely, when interest rates decrease, bond prices tend to rise because the present value of future cash flows increases. This relationship is fundamental to understanding bond market dynamics and is known as the interest rate risk.

Explanation:

The snowball route of repayment of debt focuses on the amount of the loan, where the loan interest rate does not come into consideration during the decision-making process. In the snowball method, the borrower prioritizes paying off debts starting from the smallest balance to the largest, regardless of the interest rates associated with each debt. This approach emphasizes the psychological benefit of seeing debts being paid off one by one, which can provide motivation and momentum to continue the debt repayment journey. While the avalanche method prioritizes paying off debts with the highest interest rates first, the snowball method prioritizes debts based on their balances, making it a popular choice for individuals seeking a structured and motivational approach to debt repayment.

Explanation:

The Alternative Investment Fund shall not accept from an investor, an investment of value less than Rs. 1 crore. Provided that in case of investors who are employees or directors of the Alternative Investment Fund or employees or directors of the Manager, the minimum value of investment shall be Rs. 25 lakh.

Explanation:

Non-Institutional investors invest above 2 Lakhs in a public issue. Non-Institutional investors are typically high-net-worth individuals or corporate entities who invest significant amounts of capital in securities offerings. These investors are capable of investing larger sums compared to retail investors, and therefore, the minimum investment threshold for non-institutional investors in a public issue is set higher, typically at 2 Lakhs or more. This threshold helps ensure that non-institutional investors are able to make substantial investments in the offering, reflecting their greater financial capacity and risk tolerance.

Explanation:

A close-ended fund balance is not a liquid asset. Close-ended funds issue a fixed number of shares to investors through an initial public offering (IPO), and after the IPO period ends, these shares typically trade on secondary markets. However, unlike open-ended mutual funds or liquid funds, close-ended funds do not offer daily liquidity to investors. Investors cannot redeem their shares directly with the fund company but must sell them on the secondary market, where liquidity may be limited and subject to market conditions. In contrast, cash balances, savings bank account balances, and liquid fund balances are all considered liquid assets because they can be easily converted into cash or used for transactions with minimal delay or loss of value.

Explanation:

An active secondary market promotes the growth of the primary market and capital formation. The secondary market provides liquidity to investors by enabling them to buy and sell existing securities such as stocks, bonds, and other financial instruments. This liquidity encourages investors to participate in the primary market, where new securities are issued, as they know they can easily exit their positions in the secondary market if needed. Additionally, a vibrant secondary market attracts more investors and enhances market efficiency, which in turn fosters capital formation by providing companies with access to a broader investor base and lower cost of capital. Overall, the secondary market plays a crucial role in supporting the primary market and facilitating capital formation in the economy.

Explanation:

Asset allocation refers to the strategic distribution of investment funds across various asset classes such as stocks, bonds, real estate, and cash equivalents. The goal of asset allocation is to create a diversified investment portfolio that balances risk and return based on an individual’s financial goals, risk tolerance, and investment horizon. By spreading investments across different asset classes, investors can potentially reduce portfolio volatility and enhance long-term returns. Asset allocation is a fundamental principle of portfolio management and is considered one of the most important determinants of investment success.

Explanation:

The primary function of the secondary markets is to provide liquidity for securities issued. Secondary markets facilitate the buying and selling of existing securities among investors after their initial issuance in the primary market. This liquidity allows investors to easily enter or exit positions in securities, enhancing market efficiency and ensuring that investors can convert their investments into cash relatively quickly. Additionally, liquidity in secondary markets contributes to price discovery and fair valuation of securities, making them an essential component of the overall capital market ecosystem.

Explanation:

SCORES (SEBI Complaint Redress System) can accept complaints against any market intermediary that is registered with SEBI. This includes a wide range of entities such as stock exchanges, credit rating agencies, debenture trustees, brokers, portfolio managers, mutual funds, and other market participants that are regulated by SEBI. SCORES provides a platform for investors to lodge complaints related to various issues such as misconduct, fraud, misrepresentation, and non-compliance with regulations. By accepting complaints against registered market intermediaries, SCORES aims to enhance investor protection, promote market integrity, and maintain transparency in the securities market.

Explanation:

A “Trading member” is a person admitted as a member by the Exchange. In the context of securities trading, trading members are entities authorized to execute trades on behalf of themselves or their clients on the trading platform provided by the exchange. These entities typically include brokerage firms, financial institutions, or individual traders who have been granted membership status by the exchange. As trading members, they have access to the exchange’s trading infrastructure and are responsible for executing buy and sell orders in accordance with regulatory requirements and market rules.

Explanation:

A person who has a complaint against an insurance company must lodge his complaint with IGMS (Integrated Grievance Management System). IGMS is the platform established by the Insurance Regulatory and Development Authority of India (IRDAI) to facilitate the resolution of complaints and grievances related to insurance services and products. Through IGMS, policyholders and other stakeholders can register their complaints online and track their resolution process. IGMS serves as a centralized mechanism for addressing grievances in the insurance sector, ensuring timely redressal and promoting consumer protection.

Explanation:

If a new issue is offered to the public at a lower price-to-earnings (P/E) ratio compared to similar shares in the market, it suggests that the new issue is priced attractively relative to its earnings potential. In this scenario, where the new issue is offered at 15 times earnings while similar shares in the market are priced at 19 times earnings, it indicates that the new issue is undervalued relative to its peers. Investors may perceive this as a bargain opportunity because they can acquire the shares at a lower valuation, potentially leading to higher returns in the future as the market adjusts the pricing to reflect the company’s earnings growth prospects. Therefore, it would be considered a bargain not to be missed by investors.

Explanation:

P/E = Current Market Price / EPS
EPS = Net Profit After Tax / No of ordinary shares outstanding
EPS = 25 Crores / 5 Crores
No of shares = Equity Capital / Face Value = 50 crores / 10 crores = 5
EPS = 5
P/E = 50/5 = 10

Explanation:

The SEBI (AIF) Regulations 2012 define an AIF (Alternative Investment Fund) as a privately pooled investment structure. This means that the funds collected from investors are pooled together in a private investment vehicle, which is typically structured as a trust, partnership, or corporate entity. Unlike publicly traded funds, AIFs are not open for subscription by the general public and are offered only to a select group of sophisticated investors. The term “privately pooled” emphasizes that the capital contributed by investors is aggregated into a single investment pool, which is then managed by the AIF manager according to the fund’s investment objectives and strategy.

Explanation:

Treynor ratio = (Portfolio return – Risk Free return) / Beta
Treynor ratio = (8-5)/1.2
Treynor ratio = 2.5

Explanation:

Treynor Ratio = (Scheme return – Risk Free Return) / Beta
Treynor ratio = 3%/1.2 = 2.5

Explanation:

As per the Securities Contract Regulation Act (SCRA), the term ‘Security’ excludes bullion. Bullion refers to precious metals like gold and silver in the form of bars, ingots, or coins, which are traded primarily for their intrinsic value. While shares, bonds, and derivatives are considered securities because they represent ownership rights, debt obligations, or financial contracts, respectively, bullion is excluded from this definition because it is not a financial instrument that represents ownership or a claim on an entity. Bullion is typically traded in commodity markets rather than securities markets, and therefore it falls outside the scope of securities regulation under SCRA.

Explanation:

Financial system intermediaries include banks, custodians, stock exchanges, and depositories, which play crucial roles in facilitating financial transactions, safeguarding assets, and providing platforms for trading securities.

Explanation:

Systematic risk, also known as market risk, refers to the risk inherent in the overall market or economy that cannot be diversified away by holding a diversified portfolio of assets. It affects the entire market and is caused by factors such as economic downturns, interest rate fluctuations, political instability, and natural disasters. Systematic risk impacts all investments to some degree and cannot be eliminated through diversification. Therefore, market risk is considered a systematic risk because it affects the entire market rather than specific assets or companies.

Explanation:

When there is an offer for sale, existing shareholders sell their shares to the public or to institutional investors. In this scenario, the company does not issue new shares or receive any proceeds from the sale of shares. Therefore, the share capital of the company remains unchanged because there is no issuance of additional shares by the company. In contrast, options a), c), and d) involve the issuance of new shares, which would result in an increase in the company’s share capital.

Explanation:

Treynor ratio = (Fund return – Risk free return) / Beta of the fund

Treynor ratio = 2/1.2 = 1.66

Explanation:

Securities that are already issued and available for subsequent purchases and sales can be traded on the stock exchanges where they are listed. Stock exchanges provide a centralized marketplace where buyers and sellers can come together to trade securities in a transparent and regulated manner. Therefore, investors can buy and sell already issued securities through the stock exchanges where they are listed, facilitating liquidity and price discovery in the secondary market.

Explanation:

Explanation:

14% annually can be converted into monthly figure as follows [1.14^(1/12)]-1 = 0.010978852

Monthly rate of return = 1.0978%. Hence Future value is calculated as

=FV(1.0978%,20*12,-15000,0,1)

=₹ 1,75,99,623.91

Similarly 8% return annually can be converted into monthly as [1.08^(1/12)]-1

Which is 0.6434%

So Using Rs 1,75,99,623.91 as present value and 0.6434% as rate of return, we can calculate PMT i.e the amount that can be withdrawn for 20 years i.e 240 months

=PMT(1.08^(1/12)-1,240,17599624,0,1)

=Rs 1,43,245.71

Explanation:

Shares issued through a public offer must be mandatorily listed on a stock exchange. This requirement ensures transparency and liquidity for investors who purchase shares through public offerings. Listing on a stock exchange provides investors with a platform to trade the shares and facilitates price discovery through market mechanisms. Therefore, shares issued through a public offer are required to be listed on a stock exchange as per regulatory mandates.

Explanation:

Beta of an equity fund measures its systematic risk. Systematic risk, also known as market risk, refers to the risk that cannot be diversified away and is inherent in the overall market. Beta measures the sensitivity of a fund’s returns to changes in the overall market returns. A beta greater than 1 indicates that the fund is more volatile than the market, while a beta less than 1 indicates that the fund is less volatile than the market. Therefore, beta helps investors assess the level of systematic risk associated with an equity fund.

Explanation:

Mrs. Mussadi will make more returns. This is because she invests at an earlier age, allowing her investment more time to grow through compounding. While both investments have the same return expectation of 12%, Mrs. Mussadi’s investment has a longer time horizon. The longer time horizon allows her investment to compound over a greater number of years, resulting in significantly higher returns compared to Mr. Mussadi’s investment. Specifically, since Mrs. Mussadi invests for 30 years (from age 30 to age 60), her returns are expected to be approximately 3 times more than Mr. Mussadi’s returns, who invests for 15 years (from age 45 to age 60).

Explanation:

Explanation:

Trigger limit                       Trigger time                             Market halt duration                           Pre-open call auction session post market halt
Before 1:00 pm.                                  45 Minutes                                                    15 Minutes
At or after 1:00 pm upto 2.30 pm           15 Minutes                                                    15 Minutes
10%                     At or after 2.30 pm                                     No halt                                                       Not applicable
Before 1 pm 1 hour                                45 minutes                                                     15 Minutes
At or after 1:00 pm before 2:00 pm     45 Minutes                                                      15 Minutes
15%                      On or after 2:00 pm                         Remainder of the day                                        Not applicable
20%                 Any time during market hours           Reminder of the day                                          Not applicable

Explanation:

The Department of Financial Services administers government policies related to public sector banks, term-lending financial institutions, life insurance and general insurance, as well as pension reforms.

Explanation:

Under SEBI (Securities and Exchange Board of India) regulations, individuals or entities providing investment advice for a fee need to compulsorily register as investment advisers. This includes IFAs who charge advisory fees to investors for providing personalized investment advice. Registration ensures that investment advisers adhere to regulatory standards, maintain professionalism, and act in the best interests of their clients. Mutual fund distributors, insurance advisers, and lawyers may not necessarily provide investment advice for a fee and may have different regulatory requirements. Therefore, they may not be required to compulsorily register as investment advisers with SEBI.

Explanation:

Fundamental analysis involves analyzing various factors that can affect the value of a security, including industry analysis, company analysis, and economic analysis.

• Industry Analysis: Evaluating the prospects and dynamics of the industry in which the company operates helps understand the broader trends and competitive landscape.

• Company Analysis: Assessing the financial health, management quality, competitive position, and growth prospects of the company provides insights into its intrinsic value.

• Economic Analysis: Understanding macroeconomic factors such as interest rates, inflation, GDP growth, and government policies helps gauge the overall economic environment and its impact on companies and industries.

Therefore, fundamental analysis encompasses all these aspects to make informed investment decisions.

Explanation:

The writer (seller) of an option contract has potentially unlimited risk. When a writer sells an option, they are obligated to fulfill the terms of the contract if the holder (buyer) chooses to exercise it. If the price of the underlying asset moves unfavorably against the writer, their losses can be significant and potentially unlimited. Therefore, the statement that the writer of an option has limited risk is incorrect.

Explanation:

The envelope curve containing the set of best possible combinations of a portfolio of stocks is known as the Capital Market Line (CML). The CML represents the efficient frontier of portfolios, which are optimal in terms of risk-return tradeoff. It plots the relationship between expected return and standard deviation (risk) of portfolios, taking into account both risk-free assets and risky assets. Therefore, the CML is the appropriate term for describing the envelope curve of optimal portfolios.

Explanation:

The primary function of the secondary markets is to provide liquidity for securities already issued. In secondary markets, investors buy and sell previously issued securities such as stocks, bonds, and derivatives among themselves. This liquidity allows investors to easily enter and exit positions in securities, thereby facilitating price discovery and ensuring that investments can be converted into cash relatively quickly. Therefore, providing liquidity for securities issued is the main purpose of secondary markets.

Explanation:

Tactical asset allocation involves making short-term adjustments to a portfolio’s asset allocation based on current market conditions and expectations. Unlike strategic asset allocation, which is typically based on long-term investment objectives and remains relatively constant over time, tactical asset allocation is influenced by market dynamics such as economic indicators, market trends, and valuation metrics. Therefore, tactical asset allocation depends on the market and requires active monitoring and adjustment of the portfolio to capitalize on short-term opportunities or mitigate risks.

Explanation:

Individuals can open an account with the Public Provident Fund.

Explanation:

The Government Securities Market is regulated by the Reserve Bank of India (RBI).

Explanation:

=FV(12%/12,6*12,0,-15000)

=30,706.49

Explanation:

Yes, you can make applications through the ASBA (Application Supported by Blocked Amount) facility in all issues, including public issues (IPOs) and right issues.

Explanation:

The P/E (Price-to-Earnings) ratio compares the current market price of a stock to its earnings per share (EPS). It indicates how much investors are willing to pay for each unit of earnings generated by the company. A high P/E ratio may suggest that investors expect higher earnings growth in the future, while a low P/E ratio may indicate undervaluation or lower growth expectations. Therefore, the P/E ratio is commonly used to assess the valuation of a stock relative to its earnings.

Explanation:

he Money Market primarily facilitates the borrowing and lending of short-term funds, typically for periods ranging from overnight to one year. It provides a platform for financial institutions, governments, and corporations to address short-term liquidity needs or temporary mismatches between assets and liabilities. Therefore, the Money Market is commonly used for financing short-term asset-liability mismatches, ensuring the smooth functioning of financial markets and supporting liquidity management for various entities.

Explanation:

Risks arising from factors such as inflation, interest rates, and political events are considered systematic risks. Also known as market risk, systematic risk affects the overall market and cannot be diversified away by holding a diversified portfolio of assets. These factors impact the entire economy or market, leading to fluctuations in asset prices and returns across various securities. Therefore, risks related to inflation, interest rates, and political events are categorized as systematic risks.

Explanation:

When a public issue is heavily oversubscribed, meaning that the demand for shares exceeds the number of shares offered by the company, the allotment of shares to each investor is typically lower than originally anticipated. This is because the available shares are allocated proportionately among investors based on the amount they applied for relative to the total demand. Therefore, heavily oversubscribed issues often result in lower allotments per investor.

Explanation:

In a stock split in the ratio of 1:5, each existing share is divided into five shares. Since the investor holds 100 shares before the split, each share will be split into 5 shares, resulting in a total of 500 shares after the split (100 shares * 5). Therefore, the number of shares held by the investor increases to 500 after the stock split.

Explanation:

=FV(10%/4,5*4,0,-100000)= ₹ 1,63,861.64

Here rate is divided by 4 since it is compounded quarterly. Period is multiplied by 4 since it is compounded quarterly

Explanation:

Credit risk refers to the risk that a borrower will fail to repay a loan or interest obligation as per the agreed terms. This risk arises when borrowers default on their obligations, leading to potential financial losses for the lender. Therefore, credit risk is associated with the uncertainty of timely repayment by borrowers, which can negatively impact the lender’s financial position.

Explanation:

Liquidity risk arises when there is insufficient market activity or trading volume to execute a transaction without significantly impacting the asset’s price. In this scenario, where you want to sell 10,000 shares but the volume available in the market is only 800 shares, it would be challenging to sell your shares without affecting the market price negatively. Therefore, the lack of liquidity poses a risk to the efficient execution of your transaction, leading to liquidity risk.

Explanation:

The current yield on a bond is obtained by dividing the annual coupon interest payment by the current price of the bond. It represents the annual income generated by the bond as a percentage of its current market price. Unlike the yield to maturity (YTM), which considers the total return from holding the bond until maturity, the current yield focuses only on the annual interest income relative to the current market price. Therefore, the current yield is calculated by dividing the coupon interest by the current price of the bond.

Explanation:

Delisting of shares refers to the permanent removal of the shares of a company from being listed on a stock exchange. This means that the company’s shares will no longer be traded on the exchange, and investors will no longer have access to buy or sell them through the exchange’s trading platform. Delisting typically occurs due to various reasons such as mergers, acquisitions, privatization, bankruptcy, or failure to meet listing requirements. Once delisted, the shares cannot be traded on the exchange unless they are relisted in the future. Therefore, delisting represents a permanent removal of the company’s shares from the exchange.

Explanation:

Unlike the cash segment of the stock market where price bands are applied to control volatility, in the derivatives segment, no price bands are applicable. This is because derivatives, such as futures and options, derive their value from the underlying asset’s price movement rather than having a fixed price. Therefore, the absence of price bands in the derivatives segment allows for more flexibility in trading and hedging strategies, as traders can freely take positions based on their market outlook without being constrained by price limits.

Explanation:

All of the reasons listed – (a) the certificates sent are fake, (b) the certificates sent have a court injunction against them, and (c) securities are in a name other than that mentioned in the Dematerialization Request Form (DRF) – can lead to the rejection of a dematerialization request. Each of these scenarios presents a valid reason for rejecting the request as they involve issues with the authenticity, legal status, or ownership details of the securities being dematerialized. Therefore, all three reasons may result in the rejection of the dematerialization request.

Explanation:

According to SEBI (Investment Advisers) Regulations, 2013, a non-individual investment adviser, such as a partnership firm or a company, should have a minimum net worth of Rs 50 lakhs. This requirement is mandated to ensure that investment advisers have adequate financial resources to conduct their advisory activities effectively and meet their obligations towards clients. A higher net worth is deemed necessary for non-individual advisers due to the potential scale and scope of their operations compared to individual advisers. Therefore, a net worth of Rs 50 lakhs is required for non-individual investment advisers as per SEBI regulations.

Explanation:

Equity investment = 3 Lakhs. Returns – 34%, Hence value = 300000 * 1.34 = Rs 4,02,000

Debt investment = 3.75 L. Returns – 7%. Value of debt = 3,75,000 * 1.07 = Rs 4,01,250

Gold ETF = 75,000. Returns 19%. Value of Gold ETF = 75000 * 1.19 = Rs 89,250

Total value of investments + returns = 892500

Out of this Equity is Rs 4,02,000. Hence % in Equity is (402000 / 892500) * 100 = 45%

Like wise for DEBT is (401250 / 892500) * 100 = 45%

Gold ETF is (89250/892500)*100 = 10%

Explanation:

Financial planning is the process of setting and achieving life goals through the proper management of personal finances. It involves assessing one’s current financial situation, identifying goals and objectives, developing strategies to achieve those goals, and regularly reviewing and adjusting the plan as needed. Financial planning encompasses various aspects such as budgeting, saving, investing, risk management, and retirement planning, all aimed at helping individuals achieve financial security and meet their life aspirations. Therefore, financial planning is the comprehensive process of managing personal finances to fulfill life goals.

Explanation:

Exchange-Traded Funds (ETFs) can be based on various underlying assets, including stocks, indices, or commodities, providing investors with exposure to a diversified portfolio of assets within a single investment vehicle traded on stock exchanges.