Explanation:

Gold ETFs (Exchange-Traded Funds) invest in physical gold bullion, which is held in vaults by the ETF issuer. Each share of the ETF represents a fractional ownership interest in the underlying physical gold. This allows investors to gain exposure to the price movements of gold without having to physically own or store the gold themselves. Therefore, Gold ETFs directly invest in physical gold.

Explanation:

Variance is a statistical measure that quantifies the dispersion or spread of a set of data points around their mean or average. In the context of investments, variance measures the fluctuation or volatility in the periodic returns of a scheme relative to its own average return. Therefore, the statement is true.

Explanation:

The Securities Contracts (Regulation) Act 1956 is the primary legislation in India that defines and regulates securities. It provides the legal framework for the regulation of securities markets in the country. Therefore, it defines the term “Securities.” Other acts and regulations, such as the Securities Contracts (Regulation) Rules, 1957, the Depositories Act, 1996, and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, may provide further details and regulations regarding securities, but the primary definition is provided by the Securities Contracts (Regulation) Act 1956.

Explanation:

A mutual fund acts as an intermediary between individual investors and the financial markets. It collects money from investors by issuing units or shares of the fund and then invests these funds in various financial instruments such as stocks, bonds, or other assets. The mutual fund serves as an intermediary by pooling the resources of multiple investors and investing them collectively in the market, providing diversification and professional management services. Therefore, it is an example of an intermediary in the financial system.

Explanation:

The Information Ratio is a portfolio performance measure that evaluates the average differential return of a portfolio relative to a benchmark per unit of variability of the differential return. In other words, it assesses the excess return generated by the portfolio manager compared to the benchmark, adjusted for the volatility of these excess returns. Therefore, option d) accurately describes the calculation of the Information Ratio.

Explanation:

An unlisted company can indeed make a public issue of debentures. The key distinction between a public issue and a private placement lies in how the securities are offered to potential investors. In a public issue, the securities are offered to the general public through advertisements, prospectus, and other means, while in a private placement, the securities are offered to a select group of investors without public advertisement. Therefore, an unlisted company can choose to make a public issue of debentures if it complies with the relevant regulatory requirements.

Explanation:

ETFs, or Exchange-Traded Funds, are mutual fund schemes that trade on stock exchanges just like individual stocks. As a result, the prices of ETFs fluctuate throughout the trading day in real-time based on supply and demand dynamics in the market. Investors can buy or sell ETF units at prevailing market prices during trading hours, which is why ETFs have real-time pricing. The other options mentioned may not necessarily have real-time pricing.

Explanation:

Fundamental analysis involves studying various factors related to a company to assess its intrinsic value and potential for future growth. This includes analyzing the company’s financials, such as its income statements, balance sheets, and cash flow statements, to understand its financial health and performance. Fundamental analysts also examine aspects like the company’s management team, including their track record and leadership qualities, and assess the company’s competitive position within its industry, including factors such as market share, product differentiation, and competitive advantages. Therefore, fundamental analysts study all of the above factors to form an overall evaluation of a company’s investment potential.

Explanation:

A bond’s rating is a measure of its creditworthiness and indicates the likelihood of the issuer defaulting on its debt obligations. In other words, it reflects the risk of the issuer failing to make timely payments of interest and principal to bondholders. Therefore, a bond’s rating primarily reflects its default risk rather than other types of risks such as reinvestment risk, inflation risk, or interest-rate risk.

Explanation:

Relative valuation techniques compare the current price of a stock to various financial metrics or variables that are considered significant in valuation. These metrics can include cash flow, earnings, book value, or other relevant financial indicators. By assessing how the stock’s price compares to these metrics, investors can determine whether the stock is overvalued, undervalued, or fairly valued relative to its peers or the broader market. Therefore, relative valuation techniques consider all the options listed – cash flow, earnings, and book value – as part of the valuation process.

Explanation:

Ethics encompasses more than simply following legal requirements in business. While legal requirements provide a baseline for acceptable behavior, ethics also involve moral principles, values, and standards of conduct that go beyond what is mandated by law. In ethical decision-making, individuals and organizations consider not only whether something is legal, but also whether it is morally right or wrong, fair, and just. Therefore, ethics involves a broader perspective that includes moral considerations in addition to legal requirements.

Explanation:

The Treynor Ratio is a measure of risk-adjusted performance that evaluates the excess return earned by an investment per unit of systematic risk, as measured by beta. A higher Treynor Ratio indicates better risk-adjusted performance, as it signifies that the investment has generated a higher return relative to the amount of systematic risk undertaken.

Therefore, a high Treynor Ratio is indeed indicative of better risk-adjusted performance in a comparison of similar schemes.

Explanation:

Current annual income = Rs 10,00,000

INcome at the time of retirement = =FV(10%,25,0,-1000000) = ₹ 1,08,34,705.94

Out of this 75% is Income replacement i.e ₹ 1,08,34,705.94 * 0.75 = ₹ 81,26,029.46

Explanation:

SCORES (Sebi Complaints Redress System) is an online platform introduced by the Securities and Exchange Board of India (SEBI) for investors to lodge complaints regarding securities market-related issues. It facilitates the lodging, tracking, and resolution of investor grievances efficiently. Therefore, SCORES is the investor grievance redressal system of SEBI.

Explanation:

Derivatives are financial instruments whose value is derived from the value of an underlying asset. The underlying asset can be diverse and may include equity (such as stocks), forex (foreign exchange), and commodities (such as gold, oil, agricultural products, etc.). Therefore, derivatives can have underlying assets from various categories, including equity, forex, and commodities.

Explanation:

Companies can issue securities through various means, including Initial Public Offerings (IPOs), Rights Issues, and Bonus Issues.

• An Initial Public Offering (IPO) is the first sale of a company’s shares to the public.

• A Rights Issue allows existing shareholders to purchase additional shares of the company at a discounted price.

• A Bonus Issue involves issuing free additional shares to existing shareholders in proportion to their current holdings.

Therefore, companies can issue securities through all of these methods.

Explanation:

A PUT option seller receives the premium from the buyer and in return, the seller assumes the obligation to buy the underlying security from the buyer at the specified price (strike price) on or before the expiration date if the buyer chooses to exercise the option. Therefore, the PUT option seller receives the premium and takes on the obligation to buy the security.

Explanation:

Fiduciary responsibility of Investment Advisers – Full Disclosure of all the facts has to be made to the client. There cannot be any omission of details. This not only covers not giving wrong information but it means that the correct information should have been disclosed. Not disclosing the facts might lead to the client being misled and this has to be avoided. Such a disclosure is absolutely essential when there is a conflict of interest. Disclosures should also be done when there can be a perception of conflict of interest, so that trust and faith is maintained at all times.

Explanation:

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:

Bonds with higher coupon rates have less interest rate risk compared to bonds with lower coupon rates. This is because higher coupon payments provide more income to bondholders, which can help offset potential declines in the bond’s price due to rising interest rates.

Additionally, bonds with shorter maturities have less interest rate risk compared to bonds with longer maturities. This is because the shorter time to maturity means that investors will receive their principal back sooner, allowing them to reinvest at higher interest rates if rates have risen.

Therefore, a bond with a higher coupon rate (10%) and a shorter time to maturity (10 years) would most likely possess the least degree of interest rate risk.

Explanation:

Strategic asset allocation involves determining the long-term mix of assets that best aligns with an investor’s financial goals, risk tolerance, and desired rate of return. In this scenario, the investor desires a rate of return of 8%.

Given that stocks are expected to return 10% and bonds are expected to return 6%, a weighted average of these returns should match the desired rate of return of 8%.

Let’s denote the allocation to stocks as x (in percentage) and the allocation to debt as y (in percentage). We have: 0.10x + 0.06y = 0.08(100)

Solving this equation, we find that x = y = 50.

Therefore, the strategic asset allocation for the client should be 50% in stocks and 50% in debt.

Explanation:

fter a market-wide circuit breaker is triggered and trading is halted due to extreme volatility or significant market movements, the market typically re-opens with a pre-open call auction session. During this session, orders are collected, and an equilibrium price is determined before regular trading resumes. This pre-open call auction session helps facilitate an orderly and efficient market re-opening following a circuit breaker event. Therefore, the statement is true.

Explanation:

There are no price bands applicable in the derivatives segment.

However, in order to prevent erroneous order entry, operating ranges and day minimum/maximum ranges are kept as below:

For Index Futures: at 10% of the base price

For Futures on Individual Securities: at 10% of the base price

For Index and Stock Options: A contract specific price range based on its delta value is computed and updated daily.

In view of this, orders placed at prices which are beyond the operating ranges would reach the Exchange as a price freeze.

Explanation:

Bond prices are less sensitive to changes in interest rates when bonds have larger coupon payments and shorter maturities.

Large coupon payments provide a higher level of income relative to the bond’s price, which helps offset the impact of changes in interest rates on the bond’s value. Additionally, shorter maturities mean that investors will receive their principal back sooner, reducing the bond’s sensitivity to interest rate fluctuations.

Therefore, bonds with large coupons and short maturities exhibit less sensitivity to changes in interest rates.

Explanation:

Non-systematic risk, also known as specific risk or unsystematic risk, is unique to a particular company or industry. It arises from factors specific to the company, such as management decisions, competition, labor issues, or changes in the industry. Non-systematic risk can be reduced through diversification, as investing in a variety of assets helps spread this type of risk across different companies or sectors.

On the other hand, systematic risk, or market risk, affects the entire market or a broad segment of it, and it cannot be eliminated through diversification. It includes factors such as changes in interest rates, inflation, or overall economic conditions.

Therefore, non-systematic risk is the type of risk that is unique to a company.

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 Market)

Correlation = 0.008 / (0.1*0.2) = 0.4

Explanation:

The future value of an investment is influenced by both the rate of return and the time period of the investment.

a) Rate of return: The rate of return determines how quickly the investment grows over time. A higher rate of return leads to faster growth of the investment, resulting in a higher future value.

b) Time period: The longer the time period over which the investment is held, the more time it has to grow and accumulate returns. Therefore, a longer time period generally leads to a higher future value.

Both the rate of return and the time period interact to determine the future value of an investment.

Explanation:

Bond price and Yield to Maturity (YTM) have an inverse relationship. When the YTM of a bond increases, the bond’s price decreases, and vice versa. This relationship exists because the YTM represents the effective interest rate that an investor earns on a bond if they hold it until maturity.

When the YTM increases, it means that the bond’s effective interest rate is higher than its coupon rate, making the bond less attractive compared to newer bonds issued with higher yields. As a result, investors are willing to pay less for the bond, leading to a decrease in its price.

Conversely, when the YTM decreases, it means that the bond’s effective interest rate is lower than its coupon rate, making the bond more attractive compared to newer bonds issued with lower yields. In this case, investors are willing to pay more for the bond, leading to an increase in its price.

Explanation:

Alpha is the measure of how far the scheme has outperformed index. In a simpler sense Scheme A has given 30% returns where as corresponding Benchmark (Optimal) has given 25% then Alpha is 5%. Out performance depends on Fund Manager. So All of the above is the answer

Explanation:

To find the future requirement of money, we need to account for the effect of inflation over the 3-year period. Inflation erodes the purchasing power of money over time, so we need to adjust the current expense of Rs 50,000 for inflation to find its future value.

The formula to calculate the future value of an expense considering inflation is:

Future Value = Present Value × (1 + Inflation Rate)^Number of Years

Substituting the given values: Future Value = Rs 50,000 × (1 + 10%)^3

Explanation:

Credit rating is essential for the public issue of debt securities as it provides investors with an assessment of the creditworthiness of the issuer and the risk associated with the debt instrument. Credit rating agencies evaluate the issuer’s financial condition, ability to meet its debt obligations, and the likelihood of default. Investors rely on these credit ratings to make informed investment decisions and assess the risk-return profile of the debt securities. Therefore, credit rating is a crucial requirement for the public issue of debt securities.

Explanation:

Large-cap funds typically invest in stocks of large, well-established companies with a track record of stable performance and strong financials. These companies are generally considered to be less volatile and have lower risk compared to mid-cap or small-cap companies. Therefore, large-cap funds are suitable for investors seeking to invest in lower-risk equity funds, as they offer relatively more stability and less volatility compared to other equity fund categories such as mid-cap funds, concentrated funds, or sector funds.

Explanation:

Angel funds are a sub-category of venture capital funds. Venture capital funds are investment funds that provide capital to startups and small businesses with high growth potential in exchange for an ownership stake in the company. Angel funds specifically focus on early-stage startups and typically invest smaller amounts of capital compared to traditional venture capital funds. Therefore, angel funds fall under the broader category of venture capital funds.

Explanation:

At the beginning of the year, Mr. Rajan’s asset allocation was 20% in equity (2 lakh out of total 8 lakh), 62.5% in debt (5 lakh out of total 8 lakh), and 12.5% in cash (1 lakh out of total 8 lakh).

At the end of the year, the value of his equity investment would be 2 lakh * (1 + 5%) = 2.1 lakh, and the value of his debt investment would be 5 lakh * (1 + 12%) = 5.6 lakh.

To maintain his original asset allocation:

• The desired value of equity = Total value * desired percentage in equity = 8 lakh * 20% = 1.6 lakh

• The desired value of debt = Total value * desired percentage in debt = 8 lakh * 62.5% = 5 lakh

• The desired value of cash = Total value * desired percentage in cash = 8 lakh * 12.5% = 1 lakh

Therefore, he needs to adjust his portfolio by:

• Moving (2.1 lakh – 1.6 lakh) = Rs.7500 from debt to equity

• Moving (5.6 lakh – 5 lakh) = Rs. 60000 from debt to cash

Explanation:

For mutual fund transactions, the verification and attestation of PAN (Permanent Account Number) can be done by various entities, including brokers, financial advisors who are KYD (Know Your Distributor) compliant, and bank managers. These entities are authorized to verify and attest PAN details as part of the mutual fund investment process to ensure compliance with regulatory requirements and prevent fraudulent activities. Therefore, all of the options listed (broker, financial advisor who is KYD compliant, and bank manager) are correct.

Explanation:

T-bills, or Treasury bills, are short-term debt instruments issued by the government to borrow money from the public. These securities typically have maturities ranging from a few days to one year. T-bills are commonly used by governments to raise funds for short-term financing needs, such as managing cash flow or financing temporary budget deficits. Investors purchase T-bills at a discount to their face value and receive the full face value when the bill matures, earning a return based on the difference between the purchase price and the face value. Therefore, T-bills are a key instrument used by the government for short-term borrowing.

Explanation:

The supervision of depositories such as NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) falls under the purview of the Securities and Exchange Board of India (SEBI). SEBI is the regulatory authority responsible for overseeing and regulating the securities market in India, including depositories. SEBI ensures that depositories comply with regulatory requirements, maintain the integrity of securities depository systems, and safeguard the interests of investors. Therefore, SEBI plays a crucial role in supervising depositories to ensure transparency, efficiency, and investor protection in the securities market.

Explanation:

Mutual funds pool money from multiple investors and invest in a diversified portfolio of stocks, bonds, or other securities based on a specific investment objective. For an individual who is unable to devote time for researching stocks, mutual funds offer a convenient and effective investment medium.

Mutual funds are managed by professional fund managers who conduct research, analysis, and make investment decisions on behalf of investors. By investing in mutual funds, individuals can gain exposure to the equity market without the need for individual stock selection or active management.

Moreover, mutual funds offer diversification benefits, as they invest in a variety of securities across different sectors and companies, reducing the risk associated with investing in individual stocks. Therefore, mutual funds are the most appropriate investment medium for individuals who want exposure to the equity market but do not have the time or expertise for researching stocks.

Explanation:

A request for dematerialization of securities may be rejected if there is a delay of more than 15 days in the receipt of physical securities from the day of electronic request. Dematerialization is the process of converting physical securities (shares or bonds) into electronic form. When an investor submits a request for dematerialization, they are required to surrender the physical securities to the depository participant (DP) within a specified timeframe. If there is a delay in submitting the physical securities beyond the stipulated period, the dematerialization request may be rejected to ensure compliance with regulatory requirements and prevent potential fraud or misuse of securities.

Explanation:

Distressed securities are the securities of the companies that are in financial distress or near bankruptcy. These securities are also referred to as ‘fallen angels’ and many types of funds and institutional investors are prohibited from holding these securities because of the high risk involved.

Explanation:

Fundamental analysis evaluates macroeconomic factors like interest rates, GDP, inflation, and company-specific factors like past records, balance sheets, and income statements. Market activity and overall trends are not typically part of fundamental analysis.

Explanation:

A bonus issue, also known as a scrip issue or capitalization issue, is when a company issues additional shares to existing shareholders without any capital contribution from the shareholders. The number of bonus shares issued to each shareholder is typically determined based on the number of shares the investor already holds. Bonus issues are often used as a way for companies to reward shareholders by increasing the number of shares held by them without diluting their ownership percentage. Therefore, a bonus issue is the correct term for this type of share issuance.

Explanation:

The principle of insurance is to provide compensation for unanticipated financial loss. Insurance works by pooling risks from multiple individuals or entities and spreading the financial impact of potential losses across this pool. Policyholders pay premiums to the insurer, and in return, the insurer provides financial protection against specified risks, such as property damage, health issues, accidents, or liability claims. In the event of an insured risk occurring, the insurer compensates the policyholder or beneficiary for the financial loss, helping them recover and mitigate the adverse impact of the unexpected event. Therefore, insurance serves the fundamental purpose of providing financial protection against unforeseen risks and losses.

Explanation:

Exchange rate risk, also known as currency risk, refers to the risk of loss due to fluctuations in exchange rates between currencies. In this scenario, the NRI invested $1000 in a bank deposit in India at a fixed interest rate of 10% for 1 year when the exchange rate was Rs. 45 per US$. However, after one year, the rupee depreciated, and the exchange rate increased to Rs. 50 per US$.

As a result of this depreciation, when the NRI decides to repatriate the money back to the US, they will receive fewer US dollars compared to what they originally invested. This decrease in the value of the repatriated funds is due to the unfavorable exchange rate movement, leading to a potential loss for the investor. Therefore, the risk associated with the depreciation of the rupee against the US dollar is an example of exchange rate risk.

Explanation:

In a leveraged investment in an IPO (Initial Public Offering), the investor borrows funds to invest in the IPO, amplifying their potential returns. The profits to the investor depend on the number of shares allotted to them and the listing premium achieved when the shares are listed on the stock exchange.

The number of shares allotted determines the quantity of shares the investor holds, while the listing premium represents the difference between the IPO price (issue price) and the price at which the shares are listed on the stock exchange. The higher the listing premium, the greater the profits for the investor. Therefore, in a leveraged investment in an IPO, the profits primarily depend on the shares allotted to the investor and the listing premium attained.

Explanation:

Diversification reduces the risk of a portfolio primarily because it spreads investment across multiple assets or securities. By holding a variety of investments with different risk-return profiles, diversification helps mitigate the risk of simultaneous loss in all assets. If one asset underperforms or experiences a downturn, the impact on the overall portfolio is minimized because other assets may perform differently or even positively. As a result, diversification helps to smooth out the fluctuations in portfolio returns and reduces the overall risk of the portfolio.

Explanation:

Fundamental analysis involves evaluating a company’s financials (company analysis), studying macroeconomic factors (economic analysis), and assessing industry dynamics (industry analysis) to determine the intrinsic value of a security.

Explanation:

When a public issue is heavily oversubscribed, it means that there is high demand for the shares being offered by the company. However, the company has a limited number of shares available for allocation. In such cases, to ensure fair distribution among investors, the number of shares allotted to each investor will be lower than originally anticipated. This allows more investors to participate in the offering, but results in a reduced allocation of shares for each investor.

Explanation:

When interest rates in the market increase after the issuance of a bond, the bond’s coupon rate, which is fixed at 10 percent per annum, becomes less attractive compared to the prevailing market interest rates. As a result, investors demand higher yields to compensate for the lower coupon payments relative to the new market rates.

Since the bond’s fixed coupon rate is now lower than the prevailing market rates, the bond becomes less valuable in the secondary market. Consequently, the bond’s market price decreases, causing it to trade at a price below its face value. This lower price reflects the bond’s reduced attractiveness and compensates investors for the lower coupon payments relative to the prevailing market rates. Therefore, the bond is likely to quote at a price below face value.

Explanation:

The cost of carry of a futures contract represents the costs of holding the underlying asset until the futures contract expires, including financing costs, storage costs, dividends, and other associated expenses.

As time passes, the expiration date of the futures contract approaches, and the remaining time available to earn returns or benefits from holding the underlying asset diminishes. Therefore, the costs associated with carrying the asset decrease over time.

Hence, with each passing day, the cost of carry of a futures contract decreases