Unit 3: Measuring Investment Returns

1. Pratik wants his Rs. 50,000 to grow to Rs. 200,000 at the end of 15 years. What is the earning that is required for achieving this figure?

9.58%

9.68%

9.78%

9.88%

2. A .Someone looking for higher return must take higher risk B. One who wants to avoid risk must expect lower returns.

Statement A is true

Statement B is true

Both Statement is true

None of the above

3. The risk profile of an investor depends on

Financial capacity

Attitude towards risk

Need to take risk

All the above

4. Clara Bhupatni was allotted 10,000 units of a Mutual Fund scheme at Rs. 10.00 per unit on 23rd October 2005(no entry load is paid). She chose dividend reinvestment option. She received dividends on 24th October 2006 @Rs. 1.65 per unit(reinvested at NAV of Rs. 10.47), on 8th May 2007 @Rs. 1.80 per unit (reinvested at NAV of Rs. 11.84) and on 23rd December, 2007 @Rs. 2.00 per unit (reinvested at NAV of Rs. 11.28). Clara repurchased all the units on 1^st Feb 2011 at Rs. 12.04. She wants to know the annual rate of return she earned on the investment? (Please ignore charges and Taxes if applicable)

-17.00% pa

-16.52% pa

12.81% pa

14.29% pa

5. A person has bought a bond at Rs. 120 when the interest rate in the market was 8%. Soon after the rate in the secondary market rose to 8.25%. The price of the bond in this case will _______.

Increase

Decrease

Remain the same

Cannot be determined

6. A PPF account was opened on 10th July 2000. It will mature on ________

1/4/2016

9/7/2016

10/7/2015

11/7/2014

7. ABC Company paid a dividend of Rs.5.40 during the year 2010. Amit had bought a share at Rs.61.20 at the beginning of the year. ABC's price at the end of the year is Rs.72.40. Find the total return on the stock. (approx)

25.54%

8.85%

27.12%

19.20%

8. A person wants to allot 20% of his Rs. 10 lakh portfolio to debt. He puts a sum of Rs. 1 lakh in 8% government of India bonds while allocating the remaining sum to a 270 day deposit earning 7% pa. The actual earnings from the debt portfolio in the first year is _______ (approx).

Rs. 7000

Rs. 8000

Rs. 13250

Rs. 15000

9. The price of a share being traded in the market is Rs. 450. The price earnings ratio is 15. If the market rerates the stock and upgrades the price earnings ratio to 17 the price of the stock will be ________.

Rs. 470

Rs. 490

Rs. 510

Rs. 530

10. Balman Khant wants to issue a Zero coupon bonds of Rs 1,000 face value of his own company to buy an IPL team. These are for a tenor of 25 years. You estimate the cost of funds to be 10% pa for the first 5 years, 8% pa for the next 5 years and 6% pa for the last 15 years. From Balwan's perspective, what should be the least issue price of this bond under these circumstances?

Rs 1000

Rs 117.63

Rs 176.33

None of the above

11. A growth oriented non dividend paying share is bought for Rs.250 and sold Rs.450 after 5 years, the compound annual growth rate is:

14.86%

12.47%

11.50%

10.71%

12. Your portfolio has the following expected returns. Find the expected returns

Portfolio	Probability	Expected Returns(%)
Company A	0.4	15
Company B	0.3	8
Company C	0.3	12

15%

12%

16%

17%

13. Pratik wants his Rs. 50,000 to grow to Rs. 200,000 at the end of 15 years. What is the earning that is required for achieving this figure?

9.58%

9.68%

9.78%

9.88%

14. If a person invests Rs. 5,000 at the end of each year then after 10 years the figure earning at a rate of 6% pa will become :

Rs. 66904

Rs. 65409

Rs. 65904

Rs. 66409

15. Financial capacity to take risk

Willingness to take

Ability to take risk

Need to take risk

Attitude towards risk

16. Roger Feddexter has heard about the rule of 72 but he is not familiar with the same. You explain citing an example that if any investment doubles in 13 year time frame, then according to this rule , the applicable interest rate of the investment would have been close to

5.47% pa

5.54% pa

1.80% pa

4.25% pa

17. You are examining whether your savings will be adequate to meet your retirement needs. You saved Rs.1500 last year, and you expect your annual savings to grow 5% a year for the next 14 years. If you can invest your money at 8%, how much would you expect to have at the end of the fourteenth year from now?

Rs. 62950

Rs. 15069

Rs. 54662

None of the above

18. You have invested Rs 50,000 each on 14^th April 2009 ,27^th June 2009 and 18^th Sept 2009 and Rs 1,40,000/- on 8^th January 2011 in the money market mutual funds scheme. The current value of the same is Rs 3,25,000 ( Assume today is 1^st November 2011)

7.21 %

2.49%

5.65%

5.39%

19. The probability distribution of the rate of return on ABC stock is given below: State of Economy Probability of Occurrence Rate of Return Boom 0.40 25% Normal 0.30 12% Recession 0.30 - 6% What is the standard deviation of return?

11.8%

13.5%

10.5%

12.9%

20. Read the data given below & answer the following questions: Standard deviation of an asset : 2.5% Market Standard Deviation : 2.0% Risk free Rate of Return : 13.0% Expected Return on Market Portfolio : 15.0 Correlation co-efficient of portfolio with market : 0.8 If portfolio beta is .5 and risk free return is 10%, expected return on the portfolio will be:

10%

15%

12.5%

11.25%

21. Ankush and Sons is listed in one of the regional stock exchange. While discussing the success of Indian Stock exchange in securing a prominent place amongst their global peers. You were asked the difference between the method of calculation of BSE and NSE. You have explained that

Both are calculated on basis on market capitalization

Both are calculated on basis on free float market capitalization

22. Neerajbhai wants to purchase a Bungalow in Dubai (neighbour is Asli bhai). As per the current RBI provisions , how much investment can Neerajbhai make in Dubai in his individual capacity for buying the bungalow

Maximum of USD 2,00,000/- per financial year

There is no limit as Dubai is a tax free zone

Maximum of USD 1,00,000/- per financial year

Maximum of USD 5,00,000/- per financial year

23. You want to go abroad on a family vacation tour. A professional tour company is offering you an attractive tour package in which you need to pay only 10% of amount upfront which is Rs 10,000/- while the remaining amount may be repaid in 60 EMI's of Rs 2875 each. You want to know the approximate rate of interest that is being charged to you in this offer

18% pa

25% pa

29% pa

32% pa

24. You are thinking of buying some shares of XYZ Ltd. The rates of return expected is as follows: Possible Rate of Return Probability .07 .10 .10 .50 .11 .20 .09 .10 Compute the expected return on the investment.

7.8%

8.8%

5.5%

None of the above

25. Read the data given below & answer the following questions: Standard deviation of an asset : 2.5% Market Standard Deviation : 2.0% Risk free Rate of Return : 13.0% Expected Return on Market Portfolio : 15.0 Correlation co-efficient of portfolio with market : 0.8 Market sensitive index will be:

1.5%

.8%

10

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