0801 FM (CFA540) - 1 Question Paper Financial...

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Unformatted text preview: 1 Question Paper Financial Management (CFA540): January 2008  Answer all 74 questions.  Marks are indicated against each question. Total Marks : 100 1. Which of the following statements is true with respect to the mobilization of funds by a finance manager? (a) Analysis of variance between the targeted costs and actual costs incurred and reporting on the same (b) Assessing the costs and benefits of a project under consideration (c) Interacting with banking agencies for procuring funds (d) Appraisal of investment proposals given by various departments (e) Deciding the optimum quantity of raw materials to be ordered for procurement. (1mark) <Answer> 2. Which of the following functions of the financial system allows for the exchange of current income for future income and transformation of savings into investments? (a) Savings function (b) Liquidity function (c) Payment function (d) Risk function (e) Policy function. (1mark) <Answer> 3. Which of the following is not a feature of Certificate of Deposit (CDs)? (a) CDs are issued at a discount to face value (b) CDs are freely transferable by endorsement and delivery (c) CDs cannot be issued in demat form (d) CDs offer higher yields compared to conventional deposits (e) CDs are maturity-dated obligations of banks forming a part of time liabilities and are subjected to usual reserve requirements. (1mark) <Answer> 4. The face value of a T-Bill is Rs.100. Mr. Varun made a bid for a 364-day T-Bill yielding 6.95% p.a. and maturing after 182 days. The price paid by Mr. Varun for this bill is (a) Rs.92.84 (b) Rs.94.56 (c) Rs.95.88 (d) Rs.96.65 (e) Rs.98.76. (1mark) <Answer> 5. Which of the following statements is/are true ? I. Effective rate of interest is always lower than the nominal interest rate. II. The effective rate of interest increases with increase in the frequency of compounding. III. The effective and nominal interest rates are equal if the frequency of compounding is one. (a) Only (I) above (b) Only (II) above (c) Both (I) and (II) above (d) Both (I) and (III) above (e) Both (II) and (III) above. (1mark) <Answer> 6. Which of the following is/are not diversifiable risk(s)? I. Sector risk. II. Credit risk. III. Market risk. IV. Management risk. (a) Only (II) above (b) Only (III) above (c) Both (I) and (II) above (d) Both (I) and (IV) above (e) (I), (II) and (III) above. (1mark) <Answer> 2 7. Mr. Anil wants to invest in two stocks A and B in the proportion of 1:3. The variance of the returns on his portfolio is 144(%) 2 . The variances of the returns on the stocks A and B are 169(%) 2 and 196(%) 2 respectively. The correlation coefficient between these two stocks is (a)-0.36 (b)-0.25 (c) 0.27 (d) 0.34 (e) 0.56....
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This note was uploaded on 07/20/2010 for the course ICFAI CFA taught by Professor Cfa during the Fall '09 term at Indian School of Business.

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0801 FM (CFA540) - 1 Question Paper Financial...

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