Investment-Planning-Mock Test CFP

Simulated Test 02 Question 1 Marks: 1 Suneel has asked you a practicing CERTIFIED FINANCIAL PLANNER CM about the ownership of CFPCM mark in the world. You have explained to him that _________________.

Choose one answer. a. CFPCM mark is owned by FPSB India b. CFPCM mark is owned by FPSB across the world c. CFPCM mark is owned by CFPCM Board across the world d. CFPCM mark is owned by FPSB, Denver (US) outside the United States Question 2 Marks: 1 You, being a Financial Planner, would help your client to set his financial goals in __________.

Choose one answer. a. Any term as desired by him b. Both current & future money terms c. Current money terms d. Future money terms Question 3 Marks: 1 Your client has asked you to give him a written assurance that if you prepare a Financial Plan for him, then in no case you would reveal any of his information to any other person, including his family members. As per FPSB Code of Ethics, is it possible for you?

Choose one answer. a. Yes b. No c. Yes but with prior consent of all relevant family members. d. No because client has no authority to demand such type of assurance. Question 4 Marks: 1 Under the efficient market hypothesis, which of the following term best describes the movement of stock prices?

Choose one answer. a. Statistical b. Random

c. Diverse d. Predictable Question 5 Marks: 1 A share holder who has paid for the first call, in a limited company, is liable for _______.

Choose one answer. a. His share in the total liabilities of the company b. Partially paid-up amount of the shares allotted to him c. Fully paid-up value of the shares allotted to him d. Only the secured debt of the company Question 6 Marks: 1 Among the given four bonds, each having a 20 years maturity, which one of them is the most volatile?

Choose one answer. a. BB-rated corporate b. Municipal c. Treasury d. Zero Coupon Question 7 Marks: 1 Principal vectors of an active portfolio strategy are:

Choose one answer. a. Market timing. b. Sector rotation. c. Security selection d. All of the above. Question 8 Marks: 1 Share holder in a limited company who has paid for the first call is liable for________.

Choose one answer. a. His partially paid-up amount of the shares allotted to him b. His share in the total liabilities of the company c. Fully paid-up value of the shares allotted to him d. Only the secured debt of the company Question 9 Marks: 1

What is the reliable source of pertinent information for the investor in Mutual fund scheme?

Choose one answer. a. Advice of distributor. b. AMFI website c. Financial press d. Offer Document Question 10 Marks: 1

Choose one answer. a. (A) is correct. b. (B) is correct. c. Both (A) and (B) are correct. d. Both (A) and (B) are incorrect. Question 11 Marks: 1 (A)For a Call option: Intrinsic Value = Spot price - Strike Price. Intrinsic value must be positive or zero. (B)For a Put Option: Intrinsic Value = Strike price - Spot Price. Intrinsic value must be positive or zero.

Choose one answer. a. (A) is correct. b. (B) is correct. c. Both (A)and(B) are correct. d. Both (A)and(B) are incorrect. Question 12 Marks: 1 (A) Beta reflects the systematic risk of the portfolio. (B) Beta reflects the unsystematic risk of the portfolio.

Choose one answer. a. (A) is correct. b. (B) is correct. c. Both (A)and(B) are incorrect.

d. Both (A)and(B) are correct. Question 13 Marks: 1 For maintaining flexible ratio of asset allocation, one should ________________.

Choose one answer. a. Rebalance the debt/equity allocation very frequently b. Keep fixed percentage of equity and debt investments at all times c. Generally avoid portfolio rebalancing d. Rebalance the debt/equity allocation periodically Question 14 Marks: 1 (A) Constant proportion portfolio insurance policy (CPPI policy) is the worst stock market moves in only one direction, either up or down.

policy if the

(B) Constant proportion portfolio insurance policy (CPPI policy) is the best policy if the stock market moves in only one direction, either upordown.

Choose one answer. a. (A) is correct. b. (B) is correct. c. Both (A) and (B) are correct. d. Both (A) and (B) are incorrect. Question 15 Marks: 1 If the current share price is S and the set exercise price is X, the intrinsic value of the Call Option is ______.

Choose one answer. a. Max ( 0, S-X ). b. Max ( 0, X-S ). c. Min ( 0, S-X ). d. Min ( 0, X-S ). Question 16 Marks: 1 Bond prices are sensitive to the coupon rate of the bond and the maturity term of the bond. Bond prices are less sensitive to changes in interest rates when the bonds have_______.

Choose one answer. a. Small coupons and short maturity

b. Large coupons and long maturity c. Large coupons and short maturity d. Small coupons and long maturity Question 17 Marks: 1 Among the given four bonds, each having a 20 years maturity, which one of them is the most volatile?

Choose one answer. a. Zero Coupon. b. Treasury. c. Municipal. d. BB-rated corporate. Question 18 Marks: 1 A PPF account was opened on 10th July 1990. It will mature on ________.

Choose one answer. a. 11/07/2005 b. 10/07/2005 c. 09/07/2005 d. 01/04/2006 Question 19 Marks: 1 Convertible debentures are valued on the basis of Market Value.

Choose one answer. a. This statement is false. b. This statement is true. c. Cannot say. d. Sometimes. Question 20 Marks: 1 T-bills pay interest to their investors by __________.

Choose one answer. a. T-bills pay no interest. b. Coupon interest. c. Possible price appreciation above their discounted price d. Difference between Issue price and face value. Question 21

Marks: 1 The bid-ask spread is________. (A) Broker’s commission (B) Dealer's gross income from a transaction (C) Larger for illiquid securities than for liquid ones.

Choose one answer. a. (A) only b. (B) only c. (C) only d. (B) & ( C) Question 22 Marks: 1 A crucial feature of Group Insurance Plan is that _______.

Choose one answer. a. They are not aleatory contracts b. The insured can alter the policy’s terms and conditions c. The insured must be insurable d. They are not portable Question 23 Marks: 1 Client should be helped to set his/her financial goals in _________.

Choose one answer. a. Future money terms b. Current money terms c. Current money terms & future money term d. None of the above Question 24 Marks: 1 Suresh, a Certified Financial Planner CM, is preparing a letter to circulate among prospective clients and the letter contains information on services provided by his firm. According to the Code of Ethics and Rules of Professional Conduct, all of the following information should appear in the letter except ________

Choose one answer. a. Details of firm’s portfolio size and composition b. The fees and commission sources of the firm c. Any significant financial relationships or connections with product providers d. Identity of the firm providing the service and the nature of services offered

Question 25 Marks: 1 A Financial Planner identifies and distinguishes between the needs and wants of the client. Priority should be given to __________

Choose one answer. a. Equal priority should be given b. No need to give any priority c. Needs d. Wants Question 26 Marks: 1 A client should be helped to set his/her financial goals in _________.

Choose one answer. a. Current money terms b. Future money terms c. Both current & future money terms d. None of the above Question 27 Marks: 1 While presenting and reviewing a Financial Plan to the client, you would do all of the following except ______

Choose one answer. a. Presenting the plan in writing to the client b. Expressing your opinion as a matter of fact c. Taking the client through the plan d. Sharing the assumptions on which the plan is made Question 28 Marks: 1 Which of the following is a reasonable assumption to make about the understanding of a client on the Financial Planning process?

Choose one answer. a. Client would have identified a desirable asset allocation. b. Client would have some knowledge of the assumptions on which Financial Plans are made. c. Client would be able to identify his/her financial goals. d. Client would understand the financial products being recommended

Question 29 Marks: 1 Divya, a CFPCM certificant, recently took Ajay as a client. After receiving an excessive number of questions from Ajay regarding his plan, Divya became desperate and changed her business phone number to an unlisted number. She notified Ajay that he could not have her new phone number, and that he must communicate with her via e-mail or fax. Which principle, if any, embodies Rules that require Divya to provide Ajay with her new number?

Choose one answer. a. Integrity b. Fairness c. Objectivity d. Professionalism Question 30 Marks: 1 Deficit financing provision in the Budget will lead to the following/s. (A) Increase in money supply (B) Adjustment of interest rate (C) Rise in prices (D) Fall in national income.

Choose one answer. a. (A) only b. Both (A) & (C) c. (A), (B) & (C) d. All the above Question 31 Marks: 1 A suit for sale of an asset can be made in case of default of payment in ___________

Choose one answer. a. Simple mortgage b. Usufructuary mortgage c. Simple mortgage & usufructuary mortgage d. None of the above Question 32 Marks: 1 If a CFPCM Certificant solicits clients through false or misleading communications or advertisements, he violates the ____________.

Choose one answer. a. Code of Ethics of Diligence

b. Code of Ethics of Integrity c. Code of Ethics of Professionalism d. None of the above Question 33 Marks: 1 What is the proper order for the process of estate planning?

1. 2. 3. 4.

Establish priorities for estate objectives. Prepare a written plan. Define problem areas including liquidity, taxes etc. Gather client information and establish objectives

Choose one answer. a. 3,2,1,4 b. 4,1,3,2 c. 4,3,1,2 d. 2,1,3,4 Question 34 Marks: 1 Long-term capital gains tax rate on units of a debt-based Mutual Fund scheme is ________.

Choose one answer. a. 10% at all times b. 10% on sale value minus cost or 20% of sale value minus indexed cost whichever is lower c. 20% on indexed capital gains d. Nil Question 35 Marks: 1 Which of the following is a concurrent indicator of the phase of the business cycle?

Choose one answer. a. Wholesale price Index b. Index of Industrial production c. Labor costs and capacity utilization d. Order levels in the manufacturing sector Question 36 Marks: 1

Which of the following is a reasonable assumption to make about the understanding of a client, on the Financial Planning process?

Choose one answer. a. He would understand the financial products being recommended b. He would be able to identify his financial goals c. He would have some knowledge of the assumptions on which Financial d. Client would have identified a desirable asset allocation Question 37 Marks: 1 The statement .Members shall ensure their conduct does not bring discredit to the Financial Planning profession relates to the FPSB Code of Ethics of ________.

Choose one answer. a. Integrity b. Fairness c. Compliance d. Professionalism Question 38 Marks: 1 NPV is calculated in the case of a series of _______cash flows.

Choose one answer. a. Uneven b. Even c. Zero d. Single Question 39 Marks: 1 What is the main difference between the personal Financial Planning needs of the employed and the self-employed?

Choose one answer. a. Attitude to risk/Risk appetite b. The extent of any employer-provided pension benefits c. Need to fund children’s education d. Need to fund retirement Question 40 Marks: 1 Quick asset ratio is used to

Choose one answer. a. Determine the investment Capacity of the Firm

b. Determine Firm's liquidity to cover unexpected payment c. Determine the current assets of the Firm d. Determine the current liabilities of the Firm Question 41 Marks: 2 Gita sold her equity holding of X Ltd on 1st of July, 2006. The total sale value of the shares was Rs. 75,000/-. The Securities Transaction Tax that Gita is liable to pay would mandatory to be collected by _____.

Choose one answer. a. Stock Exchange b. Mutual Fund c. Income Tax Authority d. Gita’s Broker Question 42 Marks: 2 The NAV of a debt oriented Mutual Fund is 22.25 cum dividend. It has declared a dividend of 6%, record date being 25th June 2006. Calculate the dividend receivable by an individual investor if he holds 10,000 units.

Choose one answer. a. Rs. 4,653.60 b. Rs. 6,000.00 c. Rs. 5,150.25 d. 5,250.00 Question 43 Marks: 2 If a corporation declares and pays a dividend, this transaction will________.

Choose one answer. a. Increase liabilities b. Reduce stockholders equity c. Decrease net income d. not affect total assets Question 44 Marks: 2 For the Charity Fund to be set up by Ragini, you suggest that Ragini should invest a certain amount, right now, in a deferred annuity plan, which shall earn and distribute 8% p.a. of the corpus in perpetuity. Her father Tarun wants to know what amount needs to be invested in this scheme now so that Ragini receives Rs 1 crore each year, forever,

from the beginning of the 6th year from today. (Assume yield remains 8% p.a. in accumulation phase as well as distribution phase).

Choose one answer. a. Rs. 9.19 Crore b. Rs. 8.51 Crore c. Rs. 10.62 Crore d. Rs. 11.73 Crore Question 45 Marks: 2 Assume a company has issued ten lakh equity shares and its current market price is Rs. 80. Last years. Profit was Rs. 90 lakh out of which Rs. 50 lakh was distributed as dividend. What is the earning yield?

Choose one answer. a. 8.89% b. 11.25% c. 6.25% d. 16.67% Question 46 Marks: 2 Which of the following technical indicators measure the strength of the market by comparing the number of stocks that advance or decline in a particular trading day?

Choose one answer. a. Support level. b. Breadth of the market. c. Short interest. d. Debt - equity ratio. Question 47 Marks: 2 Have a look at the data given below and answer the query appearing below . Probability Security A (Returns in %) Security B (Returns in %) 0.1 30 40 0.25 20 25 0.3 0 15 0.25 -5 0 0.1 -10 -20 Standard Deviation of the Portfolio for equal weightage of securities A & B is________.

Choose one answer. a. 10.29 b. 11.69

c. 12.88 d. 14.30 Question 48 Marks: 2 If a Corporation declares and pays dividend, this transaction will________.

Choose one answer. a. Reduce stockholders equity b. Increase liabilities c. Decrease net income d. Not affect total assets Question 49 Marks: 2 A treasury bill of face value of Rs. 1,00,000/- is selling at Rs. 97,500/- today. It is slated to mature in 60 days. The annual yield is _______.

Choose one answer. a. 13.3% b. 15.59% c. 16.43% d. 14.27% Question 50 Marks: 2 If the Buying price of a property is Rs. 20 lakh, Net income is Rs. 2 lakh and Market yield is 8%, the value of the property is Rs. __________.

Choose one answer. a. 20 lakh b. 22 lakh c. 25 lakh d. None of the above Question 51 Marks: 1 A company offers a rights issue of one for two for Rs. 7 each. The current market price is Rs. 13. The expected ex-right market price would be Rs. _______

Choose one answer. a. 9 b. 10 c. 11 d. None of the above

Question 52 Marks: 2 An MF scheme can borrow money up to ___% of its Asset Under Management for maximum ___ months.

Choose one answer. a. 30%, 3 months b. 30%, 12 months c. 10%, for any period d. 20%, 6months Question 53 Marks: 2 Dividend received by the writer of a Call during the life span of an Option __________.

Choose one answer. a. Decreases the strike price b. Increases the premium value by an equivalent amount c. Has to be given to the buyer of the option, only if he eventually exercises the option d. Can be pocketed by the writer Question 54 Marks: 2 Sahil wants to liquidate immediately some of his assets for investing in fresh business opportunities. As he would have large cash with him and it may take about 2 months before the same is invested in business purposes, Sahil wants to know the ideal investment option for this money for this short period. Your suggestion would be _________.

Choose one answer. a. He should invest this money in a Bank FDR b. He should invest this money in Long Term Bonds c. He should invest this money in the Liquid Funds Scheme of a Mutual Fund d. He should invest this money in Equity Growth Scheme of a Mutual Fund Question 55 Marks: 2 During identification of new business opportunities, one of Sahil’s friends has offered him a business proposal. In this proposal a partnership firm consisting of two partners, Sahil and his friend, shall take the franchise of a reputed pathology lab in which their investment and profit sharing ratio shall be equal. Franchise rights shall be valid for 5 years and the project requires an upfront investment of Rs. 30 lakh for required infrastructure. This may be sold to the company after 5 years, applying straight line depreciation @10% p.a. The projected profits from the firm are as follows:

Year 1 → 2.20 lakh Year 2 → 4.14 lakh Year 3 → 6.17 lakh Year 4 → 6.50 lakh Year 5 → 7.70 lakh Sahil wants to know what IRR he shall earn on his investment from this project.

Choose one answer. a. 3.24% b. 8.65% c. 12.08% d. 16.44% Question 56 Marks: 2 A 28 year old bachelor earning well for his age goes to a CFPCM Certificant for financial advice. He tells the Financial Planner that he does not want to look beyond 2 years and all he wants is advise on how to maximise his returns. The most appropriate action is likely to be: (A) Help him to invest in equity markets. (B) Assist him in investing in debt instruments of appropriate maturity. (C) Explain to him the risks of equity and debt markets.

Choose one answer. a. Only (C) b. Only (B) c. Both (A) & (C) d. Both (B) & (C) Question 57 Marks: 2 Sushil has an accumulated amount of Rs 75 lakh at the time of his retirement. Also, just before retirement, his household expenses are Rs. 2.40 lakh pa and he wishes to maintain the same standard of living after retirement. If inflation is 6.5% p.a. and interest on investment is 9% pa, how long would this money last if he gives Rs. 25 lakh to his son out of the accumulated amount?

Choose one answer. a. 31.25 Years

b. 30 Years c. 23 Years d. None of the above Question 58 Marks: 2 Shyam opens his PPF account in the year 2001- 02. When can he make his first withdrawal from this PPF account?

Choose one answer. a. After 31-03-2006 b. After 31-03-2008 c. After 31-03-2007 d. After 31-03-2016 Question 59 Marks: 2 Jack and Jill approach you to be their Financial Planner Their funds are limited and their needs are many. Some of their needs are: 1) To start an investment plan for funding their child's education 2) To set up a Testamentary Trust for their child 3) To set up a contingency fund amounting to 3 months of living expenses 4) To start saving for retirement 5) To purchase life and health insurance. Arrange these needs in the descending order of priority.

Choose one answer. a. 4, 5, 1, 3 & 2 b. 3, 5, 1, 4 & 2 c. 2, 3, 4, 5 & 1 d. 5, 2, 3, 1 & 4 Question 60 Marks: 2 What should be the life insurance cover of Jay such that in case he meets any eventuality today, his family should receive Rs. 5 Lakhs p.a. for 45 years? Assume life insurance proceeds of Jay are invested in risk free instruments bearing interest rate 6% p.a. (Note: Inflation 4.5% p.a.)

Choose one answer. a. Rs. 1,64,75,213/b. Rs. 2,24,26,000/c. Rs. 1,67,12,456/-

d. Rs. 81,91,591/Question 61 Marks: 4 On 21st January 2008 one of Ravi’s clients had an open short position of 100 lots of Nifty futures, with an average price of Rs. 5699. On 21st January, Nifty closed at Rs. 5208. But he did not square off his position until 22nd January 2008 when Nifty dipped to an intra day low of Rs. 4454. His position was squared off at this lowest price. On 22nd January 2008 Nifty closed at Rs. 4912. The lot size of a Nifty future is 50. What profit or loss was booked by Ravi’s client on his position?

Choose one answer. a. Profit of Rs. 62.25 lakh b. Loss of Rs. 62.25 lakh c. Profit of Rs. 37.70 lakh d. Loss of Rs. 37.70 lakh Question 62 Marks: 4 The cash purchase price of an item is Rs. 2,00,000. The selling company however offers installment plan, which allows an immediate payment of Rs. 10,000 and a series of 5 halfyearly payments thereafter. The first installment is payable after one and a half year. If the company wants rate of interest of 10% P.A. compounded half-yearly, what will be the halfyearly installment?

Choose one answer. a. Rs. 43,885 b. Rs. 48,383 c. Rs. 50,802 d. Rs. 29,412 Question 63 Marks: 4 The May futures contract on XYZ Ltd closed at Rs. 3,940 yesterday. It closes today at Rs. 3,898.60. The spot closes at Rs. 3,800. Raju has a short position of 3,000 in the May futures contract. He sells 2,000 units of May expiring put options on XYZ with a strike price of Rs. 3,900 for a premium of Rs. 110 per unit. What is his net obligation to/from the clearing corporation today?

Choose one answer. a. Pay Rs. 3,44,200. b. Receive Rs. 3,44,200 c. Receive Rs. 6,40,000 d. Pay Rs. 95,800 Question 64 Marks: 4

Returns on a security held for 5 years by Praveen are: First year 7%, second year 3%, third year -9%, fourth year 6%, fifth year 10%. Find the standard deviation of the security

Choose one answer. a. 8.00% b. 2.74% c. 7.37% d. 8.5% Question 65 Marks: 4 Sunil has purchased 100 convertible debentures of XYZ on 1/1/2001 at Rs. 500 each. 30% of the value of debentures in convertible into one share of Rs. 50 each after 6 years. Sunil exercised his option on 1/1/2007 and received 100 shares. Compute the cost of acquisition of these shares.

Choose one answer. a. Rs. 150 b. Rs. 500 c. Rs. 155 d. Rs. 145 Question 66 Marks: 4 A Firm's Current Ratio is 1.4, Current Liability is Rs. 1600, Acid Test Ratio is 1.2, and Inventory Turnover Ratio is 8. What would be the cost of goods sold for the firm?

Choose one answer. a. Rs. 2240 b. Rs. 1920 c. Rs. 2560 d. Rs. 2750 Question 67 Marks: 4 Dr. Monica aged 38 years earns Rs. 60000 p.m. Her income is expected to grow 7% p.a. If she saves 15% of her income p.a., what would be the accumulated amount of savings when she retires at age 60 years? (Indicate nearest figure). Note : Interest rate = 8%

Choose one answer. a. Rs. 1,20,70,000 b. Rs. 1,08,65,900 c. Rs. 1,15,66,300 d. Rs. 1,20,32,280 Question 68 Marks: 4

Dr. Anil’s daughter Pooja is likely to get married 3 ½ years hence and expected expenditure in marriage is likely to be Rs. 15 lakhs in today’s value. What is the monthly saving required for Dr. Anil’s Financial Goal? Note : Inflation is 6.3% and Interest rate is 9%

Choose one answer. a. Rs.38,000/-(approx) b. Rs.40,000/-(approx) c. Rs.50,000/-(approx) d. Rs.35,000/-(approx) Question 69 Marks: 4 Mohan invested Rs. 10,000 in XYZ mutual fund on 1/1/2000. He received cash dividends of Rs. 200, Rs. 300, Rs. 200 & Rs. 300 on 31/12/2000, 31/12/2001, 31/12/2002 & 31/12/2003 respectively. He reinvested all the dividends received in the fund. He sold the fund on 1/1/2004. What is the IRR if he sold the fund for Rs. 15,000?

Choose one answer. a. 8.53%. b. 8.83%. c. 8.00%. d. 10.67%. Question 70 Marks: 4 A client purchased a zero coupon bond 6.5 years ago for Rs. 525. If the bond matures today and the face value is Rs. 1,000, what is the average annual compound rate of return (calculated semi-annually) that the client realized on her investments?

Choose one answer. a. 10.40% b. 5.08% c. 11.34% d. 10.16% Question 71 Marks: 4 The net asset value (NAV) of a closed end fund has risen from Rs.52 to Rs.62. The fund was last quoted at Rs40, prior to the announcement of the increase in the NAV. If the fund were to trade at the same discount to NAV, estimate the new price of the fund?

Choose one answer. a. 48 b. 52 c. 54

d. 57 Question 72 Marks: 4 A company offers a rights issue of one for three for Rs.5 each. The present share price is Rs.13. If the share price does not change during the time of trading, what is the price after the rights are taken up?

Choose one answer. a. 11.00 b. 12.50 c. 10.00 d. 10.50 Question 73 Marks: 4 John has an investment with an annual income of Rs.100 and current value of Rs.6,000. If the value of the market is expected to rise to Rs.7200 by end of 3 years, the approximate yield on the investment is _______ %

Choose one answer. a. 7.25 b. 7.58 c. 7.85 d. 8.02 Question 74 Marks: 4 Sanjeev invests Rs.5000 in a Bank Deposit today @ 8% p.a compounded monthly. He hopes that this investment will enable him to fund his college education (estimated to cost Rs. 9000) which commences after 4 years. What will be the value of this investment in four years?

Choose one answer. a. Rs. 6802 b. Rs. 6870 c. Rs. 6878 d. Rs. 6925 Question 75 Marks: 4 Abhishek wants to create a reasonable financial security of Rs. 6 Lakh per annum (subject to inflation @ 5% p.a.) for his wife Chhaya & son Mohan, in case he meets any eventuality due to any unforeseen event. What should be his life insurance cover to get this amount for Chhaya & Mohan's financial security till the remaining expected life of Chhaya? Chhaya's current age 35 years and life expectancy to be 75 years and life insurance policy proceeds

of Abhishek are invested in risk / tax free instruments having interest rate 6% p.a. by her. (Indicate nearest figure without considering any existing asset)

Choose one answer. a. Rs. 90.27 lakh b. Rs. 95.69 lakh c. Rs.198.80 lakh d. Rs. 200.69 lakh