Free AAFM CWM_LEVEL_2 Practice Exam with Questions & Answers

Section C (4 Mark)

A Portfolio manager is holding the following portfolio:

The risk free rate of return is 6% and the portfolio’s required rate of return is 12.5%. The manager would like to sell all of his holdings in stock A and use the proceeds to purchase more shares of stock D. What would be the portfolio’s required rate of return following this change?

Section A (1 Mark)

Deduction under section 80RRB is allowed to the extent of:

Section B (2 Mark)

Information processing errors consist of

Section A (1 Mark)

AUM stands for

Section A (1 Mark)

During “Financial Independence” life stage, typical asset allocation should be

Section B (2 Mark)

You purchased one XYZ March 50 call and sold one XYZ March 55 call. Your strategy is known as

Section B (2 Mark)

Which of the above statements is/are correct?

Section B (2 Mark)

Assume that you purchased 100 shares of ABC in a self directed account and paid a commission on the transaction. Shortly following the purchase, you realize that you momentarily overlooked another 100 shares of ABC that you already owned in another account. Now, the redundant holdings are causing an imbalance in your overall portfolio.

What is your reaction to this situation, in case of Endowment Bias?

Section A (1 Mark)

Which of the following characteristics are unique to real estate that differ from other asset classes?

Section A (1 Mark)

Which of the following is not a derivative transaction?

Section A (1 Mark)

The most profitable credit card customers for a bank are those that:

Section C (4 Mark)

Read the senario and answer to the question.

Harish wants to go abroad on a family vacation tour in January next year. A tour operator is offering him a package in which he has to pay only Rs. 20,000 on 1st January, 2011 which is 10% upfront amount, while the remaining amount is to be repaid in 36 EMIs of Rs. 7,500 each, first EMI payable on 1st February, 2011. Harish wants to know the annual effective rate of interest which he may incur in subscribing to this offer.

Section C (4 Mark)

Read the senario and answer to the question.

Calculate the Solvency ratio?

Section A (1 Mark)

Endorsements modify

Section A (1 Mark)

If the deceased has two widows, four sons and two daughters then what is the share of each widow

Section B (2 Mark)

Both __________ depend on electronic information that has been collected about customers, in place of human knowledge, to build and manage relationships.

Section C (4 Mark)

Mr. Rajesh constructs a Long Straddle Strategy with one Nifty Call Option having a Strike price of Rs. 4500 available at a premium of Rs. 122 and one Nifty Put Option with a strike price Rs. 4500 at a premium of Rs. 85

What would be the Net Payoff of the Strategy?

• If Nifty closes at 4234

• If Nifty closes at 4766

Section A (1 Mark)

Which portion of his property can a muslim normally be guest according to muslim personal law?

Section B (2 Mark)

In US, all states except _________________ require their state, via state constitutional or statutory requirements, to balance their budget.

Section A (1 Mark)

Which of the following income is not exempt under section 10-IT Act 1961?

Section B (2 Mark)

Which of the following statements regarding a buy and hold strategy are true?

Section B (2 Mark)

Buyers of call options __________ required to post margin deposits and sellers of put options __________ required to post margin deposits.

Section A (1 Mark)

How can complaints provide the firm with great value?

Section A (1 Mark)

Risk factors in the APT must possess all of the following the characteristics except:

Section A (1 Mark)

During “Teen age years” life stage, typical asset allocation should be

Section B (2 Mark)

You borrowed Rs8500, with the understanding that you are to make monthly payments over 36 months. Interest is charged at 7% compounded monthly. If you were to increase your payments by Rs20 per month, how much less time would it take you to pay back the loan?

Section C (4 Mark)

Navin Corporation, a manufacturer of do-it-yourself hardware and housewares, reported earnings per share of Rs2.10 in 1993, on which it paid dividends per share of Rs0.69. Earnings are expected to grow 15% a year from 1994 to 1998, during which period the dividend payout ratio is expected to remain unchanged. After 1998, the earnings growth rate is expected to drop to a stable 6%, and the payout ratio is expected to increase to 65% of earnings. The firm has a beta of 1.40 currently, and it is expected to have a beta of 1.10 after 1998. The Risk Free rate is 6.25%.

What is the value of the stock, using the two-stage dividend discount model?

Section B (2 Mark)

Rule of 72 is used for

Section A (1 Mark)

A review of portfolio should be done when

Section B (2 Mark)

The equity risk premium for the market is 8 percent. Jackson Products has a beta of 0.4. The real risk-free rate is 2 percent and the expected inflation premium is 5 percent. The required rate of return for Jackson is __________ percent.

Section A (1 Mark)

______________ is based on a particular (theoretical) lottery game that leads to a random variable with infinite expected value, i.e., infinite expected payoff, but would nevertheless be considered to be worth only a very small amount of money.

Section B (2 Mark)

Choose the amount of final tax liability of R for the assessment year 2007-08:

Section A (1 Mark)

Short-term cash flow improvement may not be achieved by

Section B (2 Mark)

An investor expects the price of a stock to double after eight years. What is the expected annual rate of growth?

Section C (4 Mark)

Consider the following information for three mutual funds

Risk free return is 6%. Calculate Treynor measure.

Section A (1 Mark)

Land plus anything permanently fixed on it, including building, sheds and other items attached to the structure refers to _____.

Section A (1 Mark)

Mortgage loans:

Section A (1 Mark)

Long-term cash flow improvement may not be achieved by

Section C (4 Mark)

Suppose ABC Ltd. is trading at Rs. 4457 in June. An investor Mr. A buys a Rs 4500 call for Rs. 100 while shorting the stock at Rs. 4457. The net credit to the investor is Rs. 4357

What would be the Net Payoff of the Strategy?

• If ABC Ltd closes at 4145

• If ABC Ltd closes at 4983

Section A (1 Mark)

Which of the following is the process of enabling personnel to deliver service in manner that is beneficial to both the organization’s customers and to itself?

Section C (4 Mark)

Read the senario and answer to the question.

Which of the following would affect Net Worth of Keshav?

Section A (1 Mark)

Book building is used to help in better

Section B (2 Mark)

Expenses are 10% of the gross (office) premium. Pure premium is Rs. 200. Calculate office premium.

Section B (2 Mark)

Consider the single-factor APT. Stocks A and B have expected returns of 15% and 18%, respectively. The risk-free rate of return is 6%. Stock B has a beta of 1.0. If arbitrage opportunities are ruled out, stock A has a beta of __________.

Section B (2 Mark)

Mrs. Dikshit is a single, sixty-five year old with a modest lifestyle and no income beyond what her investment portfolio of Rs1,00,00,000 generates. Her primary investment goal is to not outlive her assets; she does not, under any circumstances, want to lose money because she recalls that her relatives lost money in the crash of 2000. Mrs. Dikshit exhibits these behavioral biases:

Section B (2 Mark)

Which of the following two outcomes is an example of Loss Aversion Bias:

Section C (4 Mark)

Rhona has a daughter Zena five years old. She wants to plan for Zena’s education and has found out that she would be requiring 2,75,000 at her age 18 and another 4,50,000 on her age 25. She also wants to have Rs. 10,00,000 for Zena’s Marriage which she expects at the age of 28. She wants to deposit the entire amount for these expenses today in an account that pays a ROI of 15% per annum compounded annually. What would this amount be?

Section A (1 Mark)

Conventional theories presume that investors ____________ and behavioral finance presumes that they ____________.

Section A (1 Mark)

_______________ is defined as the total amount of taxes paid as a percentage of a person's income.

Section B (2 Mark)

Manav invests Rs. 500/- every 6 months towards a fund to pay for his children education. If the investment pays ROI @ 9 % per annum, compounded Semi Annually, then what will be the corpus after 10 years ?