Free AAFM CWM_LEVEL_2 Practice Exam with Questions & Answers | Set: 2

Section B (2 Mark)

A fixed-rate mortgage for Rs210 000 with monthly payments is amortized over 20 years. The interest rate is 4.85% compounded semi-annually for a 7-year term. How much of the mortgage principal has been repaid by the end of the 7-year term?

Section A (1 Mark)

Gift received is not taxable in hands of

Section C (4 Mark)

Belstate reported net income of Rs221 million in 1993 on revenues of Rs8298 million. It paid out 31% of its earnings as dividends, a payout ratio that is expected to remain level from 1994 to 1998, during which period earnings growth is expected to be 13.5%. After 1998, earnings growth is expected to decline to 6%, and the dividend payout ratio is expected to increase to 60%. The beta is 1.15 and this figure is expected to remain unchanged. The treasury bill rate is 7%.

Estimate the price/sales ratio for Walgreens, assuming its profit margin remains unchanged at 1993 levels.

Section B (2 Mark)

Which of the following portfolios falls below the Markowitz Efficient Frontier?

Section B (2 Mark)

The Motor Vehicle Insurance Policy has inbuilt cover for death/disability of driver/owner caused by accident during the use of the insured motor vehicle up to Rs. __________ in case of car/commercial vehicle and Rs. _________ in case of two wheelers.

Section B (2 Mark)

Mansi needs Rs. 25,000/-, 5 years from now. She would like to make equal payments at the Begin of each year from now onwards into an account that yields annual ROI @ 7 % per annum. What should be her annual payments?

Section A (1 Mark)

Which of the following is an assumption of the CMT?

Section A (1 Mark)

An insured becomes entitled for getting No Claim Bonus only at the renewal of a policy after the expiry of the full duration of _________ months.

Section B (2 Mark)

Risk to bondholders comes from

Section B (2 Mark)

Miss Femina aged 17, is married to Mr. Masculine. Her mother alone is alive income by way of interest on loans, of Miss Femina will be:-

Section B (2 Mark)

Vikash has following portfolio with related details given below:

Calculate the portfolio beta?

Section C (4 Mark)

Tom dies in January of the current year and leaves his wife Jeanne a $50,000 insurance policy. Jeanne elects to receive the proceeds at $10,000 per year plus interest, for five years. In the current year, she receives $12,000 ($10,000 plus $2,000 interest).

How much must Jeanne include in her gross income?

Section C (4 Mark)

Maxis Ltd reported Earnings Per Share of Rs 2.10 in 1993, on which it paid dividends per share of Rs 0.69. 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 of Return is 6.25%.

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

Section A (1 Mark)

_____________ is defined as the transfer of services to private enterprise in US.

Section C (4 Mark)

The returns of 2 shares are as follows

Calculate the covariance of returns.

Section C (4 Mark)

Amit an industrialist wants to buy a flat in a housing society presently costing Rs. 35,00,000/- after 6 years. The cost of the house is expected to increase by 15% p.a for the first 3 years and by 10% in the remaining years. Amit wants to start a SIP with monthly contributions in Birla Front Line Equity Mutual Fund to pay for the down payment of the house which would be 25% of the house value at that time. You as a CWM expect that the fund would give ROI of 14% p.a. compounded monthly in the next 10 years. Please advise Amit the monthly SIP amount starting at the beginning of every month for the next 6 years to fulfill his goal of buying the Flat he desires.

Section A (1 Mark)

Holistic advisory services which cater to specific client segments such as entrepreneurs, professionals are known as____________________.

Section A (1 Mark)

How many sections are there in Householder’s Insurance Policy?

Section A (1 Mark)

_____________ is defined as fairness in spending in US.

Section A (1 Mark)

The first step of portfolio management is:

Section A (1 Mark)

Conclusions about technical analysis suggest that:

Section A (1 Mark)

Mr. Sharma is aged 50 years at present. He has invested some amount in an annuity which will pay him after 10 years Rs. 25,000/- p.a. at the beginning of every year for 10 years. Rate of interest is 6% p.a. Calculate how much amount he has invested now?

Section A (1 Mark)

For any given stock, which of the following must be true?

Section A (1 Mark)

NSSO stands for ____________

Section A (1 Mark)

A market timing approach that increases the proportion of funds in stocks when the stock market is expected to be rising, and increases cash when the stock market is expected to be falling is a:

Section A (1 Mark)

Tarun has Rs. 100000/- in a account and starts investing Rs. 7500/-per month at the beginning of the month. If the account pays 10% p.a interest compounded half yearly. What will be the accumulated amount in his account after 20 years.

Section A (1 Mark)

____________represents people’s propensity to claim an irrational degree of credit for their successes.

Section C (4 Mark)

Dyder System is a full-service truck leasing, maintenance, and rental firm. The following are selected numbers from the financial statements for 1992 and 1993 (in millions).

The firm had capital expenditures of Rs800 million in 1992 and Rs850 million in 1993. The working capital in 1991 was Rs34.8 million, and the total debt outstanding in 1991 was Rs1.75 billion. There were 77 million shares outstanding, trading at Rs29 per share.

Estimate the cash flows to the firm in 1992 and 1993(in Rs Millions)

Section C (4 Mark)

Read the senario and answer to the question.

Keshav purchased a Health Insurance. The policy has a calendar-year deductible of Rs. 500 and 80:20 as coinsurance. Keshav was hospitalized with a covered illness on January 23rd 2009. This hospitalization was his first claim under the said policy for the calendar year. His covered medical expenses were Rs. 20,500. How much of this amount will the insurer pay and how much will Keshav be required to pay to the Hospital?

Section B (2 Mark)

A collar with a net outlay of approximately zero is an options strategy that

Section B (2 Mark)

Asset allocation policy

Section B (2 Mark)

As Per Article 12 Double Taxation Avoidance Agreement with US, _____per cent of the gross amount of the royalties or fees for included services as defined in this Article, where the payer of the royalties or fees is the Government of that Contracting State, a political sub-division or a public sector company.

Section A (1 Mark)

A European put option can be exercised

Section A (1 Mark)

The principle that people do not buy or rent real estate, but judge properties as different sets of benefits and costs is called

Section C (4 Mark)

Suppose that an investor makes an investment in Stock ABC and that over the next 12 months ABC appreciates by 10 percent. He then thinks of selling ABC for normal portfolio rebalancing purposes, but then come across an item in the, The Economic Times that sparks new optimism: Could ABC climb even higher?

Which answer describes the likeliest response from an investor with regard to exhibiting Regret Aversion Bias, given ABC’s recent performance and this new information?

Section A (1 Mark)

A testator sometimes make two wills one relating to his property in his native country and other relating to his property in some foreign country this type of will is called

Section B (2 Mark)

Withholding Tax Rates for payments made to Non-Residents are determined by the Finance Act passed by the Parliament for various years. The current rates for Interest are:

Section A (1 Mark)

In order to have confirmation of a major market trend under the Dow Theory, the

Section A (1 Mark)

A ____________________ tax system places a relatively large tax burden on lower-income people and a relatively small tax burden on upper-income people.

Section C (4 Mark)

Division Z is a profit centre, which produces four products A, B, C and D, Each product is sold in the external market also. Date for the period is as follows:

Product D can be transferred to division Y but the maximum quantity that might be required for transfer is 2,500 units of D.

The maximum sales in the external market are:

Division Y can purchase the same product at a slightly cheaper price of Rs. 125 per unit instead of receiving transfer of product D from division Z.

What should be transfer price for each unit for 2500 units of D, if the total labour hours available in division Z is:

Section C (4 Mark)

Mr. Raman Gehlot, aged 55 years, is owner of midsized business firm. His family consists of his wife Anupama, aged 55, son Nishant aged 29 and daughter Nivedita aged 27. His wife is a housewife and social worker. Both of their children are happily married and well settled. The couple anticipates their life expectancy to be 75 years each.

The gross annual income of Raman for the previous year 2010–11 is expected to be Rs. 9,60,000. The couples’ household expenses are estimated to be Rs. 4,90,000 p.a. Taking into account incidental expenses of another Rs. 85,000 the net expenses of the family are estimated to be Rs. 5,75,000 for the previous year 2010–11. Thus they achieved a net surplus of Rs. 3,85,000 during the year. Raman has a net saving of Rs. 12,00,000 which he would like to invest for his post retirement purposes at the beginning of the year.

Currently Raman has approximately 5 years left for retirement and thus he is not very aggressive in his investments. The returns of his portfolio based on asset allocation during the accumulation and distribution phase are calculated as below:

Section A (1 Mark)

How many types of power of attorney are there?

Section B (2 Mark)

Total income of an individual including long-term capital gain of Rs. 50,000 is Rs. 1,10,000, the tax on total income shall be:

Section C (4 Mark)

Read the senario and answer to the question.

What will be the taxable amount of Gratuity on his retirement?

Section A (1 Mark)

An aggressive asset allocation would contain larger proportions of __________ than a conservative allocation.

Section B (2 Mark)

You are considering the purchase of a quadruplex apartment. Effective gross income (EGI) during the first year of operations is expected to be Rs33,600 (Rs700 per month per unit). First-year operating expenses are expected to be Rs. 13,440 (at 40 percent of EGI). Ignore capital expenditures. The purchase price of the quadruplex is Rs. 200,000. The acquisition will be financed with Rs60,000 in equity and a Rs. 140,000 standard fixed-rate mortgage. The interest rate on the debt financing is eight percent and the loan term is 30 years. Assume, for simplicity, that payments will be made annually and that there are no up-front financing costs.

What is the overall capitalization rate?

Section A (1 Mark)

Marketing relationships are:

Section C (4 Mark)

Suppose Nifty is at 4450 on 27th April. An investor, Mr. A enters a long straddle by buying a May Rs 4500 Nifty Put for Rs. 85 and a May Rs. 4500 Nifty Call for Rs. 122.

What would be the Net Payoff of the Strategy?

• If Nifty closes at 3729

• If Nifty closes at 5214

Section A (1 Mark)

The following is capital receipt:

Section A (1 Mark)

If POA in respect of in moveable property of value more than ………………….it must be registered