Free AAFM CWM_LEVEL_2 Practice Exam with Questions & Answers | Set: 8

Section A (1 Mark)

Independent Individualist has __________ risk tolerance

Section A (1 Mark)

Select the INCORRECT statement regarding the CML

Section B (2 Mark)

The following parameters are available for two mutual funds:

Calculate Treynor’s performance index for Fund A & Fund B respectively

Section C (4 Mark)

Read the senario and answer to the question.

Sajan and Jennifer want to arrange for the funds to meet marriage expenses of their children. They plan the wedding of Mark after 23 years from now and that of Stephanie after 25 years from now. To accumulate the funds for marriage, you advise to start a monthly Systematic investment Plan (SIP) immediately in Equity scheme of a mutual fund. Such SIP will continue for the next 15 years. You further advise to hold the investment in equity shares till Stephanie’s marriage to meet the wedding expenses. After meeting the expenses of Marks’ marriage, the balance fund in the quity scheme are allowed to appreciate to meet the differential expenses of Stephanie’s marriage. The amount of SIP comes to __________.

Section A (1 Mark)

A _________ portfolio is a well-diversified portfolio constructed to have a beta of 1 on one of the factors and a beta of 0 on any other factor.

Section C (4 Mark)

Personal Data

Financial Data

Shanker and Parvati Pandey have the following assets at fair market value (FMV):

Their simplified income statement is presented as follows:

They have no liabilities and no company-sponsored retirement plans.

They have no wills and they live in a non-community property state.

Shankers’ parents can meet all current expenses from current cash flow but have very limited reserve funds

Other Relevant Data

●They are inexperienced investors, but they are willing to take reasonable and normal investment risk if appropriate, but they do not wish to invest aggressively.

●Both Shanker and Parvati have purchased term life insurance policies with Rs. 250,000 death benefit on each; they own their own policies, and Ganesh is the contingent beneficiary on both policies.

●Shanker is the primary beneficiary of Parvati’s single premium deferred annuity; Ganesh is the contingent beneficiary.

●You have found their disability insurance inadequate. The Pandey have indicated they could fit your proposed Rs. 3500 annual premium for an adequate policy into their living expenses.

●You have reviewed their auto, homeowner’s, liability, and life insurance and found their policies adequate. Shanker and Parvati are responsible for their medical expenses.

●Ganesh is an intelligent high school student who earns scholarship of Rs. 2,000 annually and has a Rs. 500 in savings account.

●The “cash” is invested in a variety of money market funds and insured savings accounts.

●They do not plan additional children and they have no other dependents.

●The Pandey currently can save Rs. 5,000 per year out of current salary and can continue to do so (in inflation-adjusted Rupees) until they retire in 20 years. This savings rate assumes that all planned asset acquisition and replacements are paid out of income before savings (except the three goals as per below.

Goals (in order of priority)

1.College education for Ganesh. They expect to spend a total of Rs. 5,00,000 (Present value) for his entire education.

2.Retirement in 20 years which maximizes their standard of living at retirement.

3.Parvati and Shanker plan to take 6 months off from work (“sabbatical”) in 4 years for travel and research and to spend Rs. 1,50,000.

Economic Environment

The economy has been in a period of modest economic growth for about 2 years. Inflation, as measured by the CPI, was at a 4.9% annual rate over the last year. Ninety-day T-bill rates are currently 6%, while the yield to maturity on 20-year government bonds is 7.5%. Most forecasts call for little change in these conditions over the short and long term.

Assumptions provided by Wealth Manager

Section A (1 Mark)

Rapid accumulation stage suggests that the net worth is ________

Section B (2 Mark)

From the following data in respect to the property price, calculate the value of the property for your client Mr. Nitin Sharma, as per the capitalization rate.

Section A (1 Mark)

Which of the following types of income is received by individuals without deduction of basic rate tax?

Section B (2 Mark)

Reliance Ltd. has issued a preferred stock that pays Rs.10 per share. The dividend is fixed and the stock has no expiration date. What is the intrinsic value of Reliance Ltd. stock, assuming a discount rate of 14%?

Section B (2 Mark)

The Net Worth Required for an Individual is _________________ for a Partnership Firm is ____________________ and Body Corporate is______________ to fulfil the Capital Adequacy requirements under the SEBI Investment Advisor Regulations 2013.

Section C (4 Mark)

Tapley Dental Supply Company has the following data:

If Tapley could streamline operations, cut operating costs, and raise net income to Rs300, without affecting sales or the balance sheet (the additional profits will be paid out as dividends), by how much would its ROE increase?

Section B (2 Mark)

Which of the following statements is TRUE concerning zero coupon bonds?

Section A (1 Mark)

After the satisfaction of insured’s claim from the insurer, the insured should pursue in the recovering of rights from the 3rd party.

Section A (1 Mark)

Which one of the following statements is incorrect?

Section B (2 Mark)

To pay for new equipment with a cash price of Rs7500, you need to borrow at 5.3% compounded monthly, then make monthly payments for 32 months. How much less would your payments be if you were able to save Rs2100 as a down payment before you purchase the new equipment?

Section A (1 Mark)

Select the correct statement regarding the market portfolio. It:

Section A (1 Mark)

Division of the market into groups based on variables such as age, gender, size, income, occupation, education, religion, race and nationality comes under which of the following market segmentation?

Section A (1 Mark)

Trust banks are ____________

Section A (1 Mark)

……………………is a gift in the form of a single transfer to the same person of several things of which one is and the others are not burdened by an obligation, the done can take nothing by the gift unless he accepts if fully.

Section B (2 Mark)

Payback period is

Section A (1 Mark)

___________is concerned with the rational solution to the problem at hand. It defines an idea that actual decisions should strive to approximate.

Section B (2 Mark)

R acquired shares of G Ltd, on 15/12/1998 for Rs. 5 lakh which were sold on 15/5/2011 for Rs. 18.50 lakh. Expenses of transfer were Rs. 20,000/-. He invests Rs. 6 lakh in the bonds of NHAI on 16/10/2011. Compute the capital gain for the assessment year 2012-13.

Section B (2 Mark)

How much interest is paid in total on a 3-year loan for Rs27 400? The interest rate is 8.6% compounded monthly and the payments are monthly?

Section B (2 Mark)

If JVM Industries pays dividend of Rs.6 per share which is growing at a 8 percent rate per year and is expected to grow at the same rate in future. Its required rate of return is 16%. Determine its share price.

Section B (2 Mark)

Ramesh living in Kolkata is a trustee for Brijesh living in Mumbai, Ramesh remits trust funds to Brijesh by bills drawn by a person of high creditworthiness in favor of the trustee as such and payable at Mumbai. The bills later got dishonored. Is Ramesh bound to make good the loss?

Section A (1 Mark)

The minimum annual income for availing Auto Loan is: