WorksheetsInvestment Fundamentals Worksheet
Total questions: 76
Worksheet time: 38mins
What is the fundamental purpose of investing as described in the notes?
To avoid any risk
To use funds to earn income or capital appreciation
To spend cash immediately
To avoid future benefits
In finance, an investment primarily refers to the purchase of:
A) A consumption good
B) A financial product or other valuable item with expectation of future returns
C) A non-liquid asset only
D) A liability to be paid later
Which two factors are identified as fundamental aspects of investment?
Dividend yield and liquidity
Time and risk
Price and volume
Cost and tax
The primary distinction between Investment and Speculation is mainly based on:
The color of the stock
Time horizon and level of risk
The country of origin
The number of shareholders
Which feature is NOT listed as essential for an investment decision?
Safety
Liquidity
Marketability
Instant gain
Liquidity in an investment means:
High risk
Ability to quickly sell for cash with minimal loss
What type of investment can be traded in markets and is described as variable income security?
Government deposits
Equity shares
Bank fixed deposits
Real estate
Which of the following is NOT an example of Fixed Income Securities listed in the notes?
A) Preference shares
B) Debentures
C) Bonds
D) Equity shares
Government securities are considered:
Highly risky
Risk-free
Not tradable
Only for foreign investors
Money market securities are primarily designed to:
Provide long-term capital growth
Increase liquidity with short-term instruments
Offer guaranteed returns at 20% annually
Fund escrow services
Which instrument is issued by banks offering interest in exchange for keeping a lump-sum deposit?
Treasury bill
Certificate of Deposit (CD)
Debenture
Non-Negotiable Securities cannot be traded in financial markets. Which of the following is an example of such a non-negotiable instrument?
Bank deposits
Treasury bills
Corporate bonds
Mutual funds units
Mutual funds are described as pools of money invested in:
Only cash
Stocks, bonds, and short-term debt
Real estate only
Commodities exclusively
An Open-Ended mutual fund is characterized by:
A) A fixed number of shares and a lock-in
B) No fixed period or constraint on units traded
C) Being non-transparent to investors
D) Only investing in money market instruments
A Closed-Ended mutual fund:
Can issue new shares freely
Has a fixed number of shares and trades on a stock exchange
Is always liquid at NAV
Never trades on an exchange
In investment environments, higher returns are associated with:
Lower risk
Higher risk
No risk
Guaranteed returns
Which source is NOT listed as a source of financial information for security analysis?
World affairs
Domestic cultural trends
Company information
Security price quotations
CAPM stands for:
Capital Asset Pricing Model
Corporate Asset Profit Metric
Cash Asset Pricing Method
Cost Allocation Pricing Measurement
CAPM uses which three inputs to estimate expected return?
Dividend yield, book value, and market cap
Risk-free rate, beta, and market risk premium
Inflation, tax rate, and unemployment
Liquidity, safety, and marketability
In CAPM, beta measures:
Systematic risk of the asset
Unsystematic risk of the asset
The asset's tax rate
The asset's liquidity
Systematic risk is also known as:
Diversifiable risk
Unsystematic risk
Market risk
Company-specific risk
Which type of risk can be mitigated by diversification?
Systematic risk
Market risk
Standard deviation in the notes is used as a measure of:
Expected return
Risk/dispersion of returns
Tax efficiency
Liquidity
The beta of a stock with beta 1.0 compared to the market indicates:
Zero risk
Higher volatility than the market
The same systematic risk as the market
No correlation with market
If a bond’s price moves inversely with interest rates, when rates rise:
A) Bond prices rise
B) Bond prices fall
C) Bond prices stay the same
D) Only convertible bonds are affected
Which of the following is NOT a type of bond risk listed?
Credit risk
Inflation risk
Interest rate risk
Liquidity risk
Yield to Maturity (YTM) is the discount rate that:
Equates the present value of a bond’s cash flows to its current price
Is always equal to the coupon rate
Is never used in practice
Applies only to zero-coupon bonds
Yield to Call (YTC) refers to the return if a bond is held until:
Maturity
Call date
Settlement date
The next coupon date
A perpetuity bond pays:
Only at maturity
Fixed periodic interest forever with no maturity
Increasing payments every year
A lump sum at year 10
In semi-annual bond valuation, the coupon and discount rates are adjusted by:
Doubling the rates
Halving the rates
Keeping the rates the same
Using square roots
The present value formula PV = Sum of discounted cash flows applies to:
Equities only
Bonds/Debentures
Real estate only
None of the above
Which of the following is a type of mutual fund objective?
Microcap only
Growth, Income, Balanced, Money Market
Real estate only
Derivative-only
A fund that aims to provide capital appreciation and invests primarily in equities is called:
Growth scheme
Income scheme
The term “intrinsic value” in security analysis is best described as:
The market price
The present value of all future cash flows
The par value of a stock
The accountant’s book value
The formula for Return on Investment (ROI) is generally a ratio of:
Net profit to total equity
Gain from investment to cost of investment
Dividend yield to share price
Cash flow to debt
What does “risk premium” in CAPM refer to?
Excess return of the market over the risk-free rate
The coupon rate of bonds
The dividend yield
The inflation rate
Which of the following is NOT listed as a source of information for security analysis?
World affairs
Industry information
Celebrity endorsements
Company information
In the context of bonds, what is “yield” primarily a measure of?
Tax impact
Return on capital invested
Market volatility
Liquidity risk
The concept of "inflation risk" for bonds refers to:
Risk that prices rise but coupons stay fixed
Purchasing power risk as inflation rises
Risk of currency depreciation
Risk of early redemption
In a balanced mutual fund, investments are spread across:
Only cash
Equities and debt instruments
Only derivatives
Commodities only
A "tax-saving scheme" mutual fund typically offers:
Higher leakage of fees
Tax rebates or exemptions
No diversification
Guaranteed returns
What is the primary objective of setting an investment policy in the investment management process?
To pick individual stocks randomly
To define objectives, risk tolerance, and constraints
To maximize tax payments
To minimize monitoring
Which type of risk is described as the risk inherent to the entire market or a market segment?
Unsystematic risk
Systematic risk
Company-specific risk
Liquidity risk
48. The term "call risk" is associated with:
Callable bonds
Equity shares
Fixed deposits
Mutual funds
Which of the following describes the possibility that a bond will be called before maturity?
Possibility that a bond will be called before maturity
Risk of call center failures
Risks of callable options in equities
Risk from currency calls
The “holding period return” (HPR) is the return earned over:
The entire life of the investment
The holding period only
Only the capital gain portion
Only the dividend portion
For semi-annual bond payments, the half-yearly discount rate used is:
Half of the annual discount rate
Twice the annual discount rate
The same as the annual rate
The square root of the annual rate
What is the primary goal of fundamental analysis?
To identify short-term price movements
To determine a security’s intrinsic value through financial data
To speculate based on rumors
To time the market perfectly
Which financial statement provides a snapshot of a company's assets, liabilities, and shareholders’ equity at a point in time?
Income statement
Balance sheet
Cash flow statement
Statement of changes in equity
The formula for calculating Net Profit Margin is:
Net Income / Revenue
Revenue / Net Income
Gross Profit / Revenue
Operating Income / Revenue
A high current ratio suggests:
(a)
Which of the following is a sign of a financially healthy company?
Strong liquidity
High profitability
Low debt
Price-to-Earnings (P/E) ratio is most directly used to assess:
Liquidity
Valuation relative to earnings
Debt levels
Growth rate
Which of the following is a measure of a company's operating efficiency?
Return on Equity (ROE)
Debt-to-Equity Ratio
Interest Coverage Ratio
Gross Margin
In a Discounted Cash Flow (DCF) model, the present value of future cash flows is discounted at:
The inflation rate
The cost of capital (discount rate)
The tax rate
The growth rate
Which factor is NOT typically considered in industry analysis?
Competitive structure
Regulatory environment
Personal preferences of the analyst
Growth potential
A stock with high growth potential but low current profitability is often referred to as:
Value stock
Growth stock
Defensive stock
Income stock
In technical analysis, a bullish breakout occurs when price moves:
Below a support level
Above a resistance level
Within a trading range
On high volume only
Moving Averages help traders identify:
Fundamental value
Trend direction and potential support/resistance
Which of the following is a measure of a company's size in the stock market?
Earnings per share
Market capitalization
Dividend policy
Market capitalization
Volume confirmation in chart patterns usually suggests:
Weaker conviction
Stronger conviction behind a move
Irrelevant to price action
Only for options trading
In the context of risk, diversification primarily reduces:
Systematic risk
Unsystematic risk
Market risk
Inflation risk
The debt-to-equity ratio measures:
Liquidity
Leverage
Profitability
Asset turnover
Which valuation method is most sensitive to changes in growth assumptions?
P/E multiple
DCF (Discounted Cash Flow)
Asset-based valuation
Dividend discount model
A stock with a high dividend yield is typically classified as:
Growth stock
Income stock
Cyclical stock
Momentum stock
The term “fair value” in valuation means:
Market price
Intrinsic value aligned with fundamentals
Historical cost
Par value
When analyzing an income statement, which line item directly affects net income the most?
Revenue
Interest expense
Depreciation
The formula for Return on Equity (ROE) is:
Net Income / Total Assets
Net Income / Shareholders' Equity
Revenue / Equity
Net Income / Liabilities
In a balance sheet, which side do assets appear on?
Left side
Right side
Top only
They are not shown in a standard layout
In fundamental analysis, which ratio helps assess a company’s profitability relative to sales?
Net Profit Margin
Debt-to-Equity
Current Ratio
Asset Turnover
Which of the following best describes a "fair value" estimate by fundamental analysis?
The current market price
An intrinsic value derived from discounted cash flows or comparable multiples
The price at which the stock last traded
The par value of the stock
Which technical concept describes the tendency of prices to move in the same direction for a period?
Random walk
Trend
Mean reversion
Range trading
In ratio analysis, what does the Quick Ratio measure?
Long-term solvency
Short-term liquidity excluding inventory
Asset efficiency
Profitability
In fundamental analysis, which factor is least influenced by market sentiment?
Cash flow stability
Short-term price movements
Earnings quality
Asset base
What is the primary purpose of a cash flow statement?
To show net income
To show sources and uses of cash over a period
To show asset depreciation
To show shareholder equity changes
In risk management, which type of risk cannot be eliminated by diversification?
Unsystematic risk
Systematic risk
Credit risk
Liquidity risk
