By Rohit Chipper

AIR 17 CA Final
air 18 ca inter
 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024

NOTE

Hey there,

Happy to have you here!

Do read this note on how to us this MCQ summary and compilation. It will help you
to prepare for 30 marks MCQ in your AFM exam.

We have shared the summary of MCQs in first 5 pages so, that you can quickly
revise them before exams and it has been observed that generally ICAI repeats
few MCQs from its own publications like RTPs , MTPs and now they have released
some MCQs on BOS app.

This book is packed with AFM multiple-choice questions (MCQs) and case scenarios
from the ICAI BOS portal, RTP May 24 and MTP Series I & II. The MCQs are
sorted by difficulty: Simple (S), Medium (M), and Difficult (D), just like on the
BOS portal.

Have created a small index for this compilation below

Sr.No, Topic Page

1 Individual MCQ Summary 3
2 Case Scenario Based MCQ Summary 7
3 Individual MCQ Compilation 9
4 Case Scenario Based MCQ Compilation 20

Note: Focus more on case scenario based MCQs as in latest MTP, ICAI has asked
only case scenario based MCQs and no individual MCQs

All the best!

You can join our telegram channel for more CA Final notes, guidance and strategy:
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Page 2
 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024

AFM Individual MCQ Summary

Source Qn Ans Summary
Strategic financial management combines the backward-looking, report-focused discipline
BOS 1 D of (financial) accounting with the more dynamic, forward-looking subject of financial
management.
BOS 2 B Capital investment is the springboard for wealth creation
The primary objective of investors in a world of economic uncertainty is to select
BOS 3 A investment and financial opportunities that will give them maximum expected returns at
minimum risks.
Contagion Risk is associated with diffusion of economic crisis throughout a market, asset
BOS 4 C
class or geographic region.
BOS 5 C Credit Risk: when a counter party fails to honour their obligations
Compliance Risk: faced by a company when it ventures into a new industry or geographical
BOS 6 B
area with completely different laws and regulations
Contagion Risk is associated with diffusion of economic crisis throughout a market, asset
BOS 7 C
class or geographic region
One-year VaR [Value at risk] of a portfolio is Rs. 10 crores with a confidence level of 95%.
BOS 8 C This means - The worst expected portfolio loss over one year will not exceed Rs. 10 crore
with 95% confidence
BOS 9 A Variance measures How far each number in the set is from the mean.
Expected cash flows are calculated as Sum of likely cash flow of project multiplied by
BOS 10 B
probability of respective cash flows.
BOS 11 B Qualitative factors is generally overlooked by capital budgeting decision makers.
BOS 12 B When the risk is high, the cash flow under certainty equivalent coefficient is Lower
BOS 13 D Scenario Analysis is considered under scenarios such as worst, base & best Case Scenario

Certainty Equivalent approach is Guaranteed return from an investment after adjusting

BOS 14 A
for certainty equivalent coefficient.
Sensitivity analysis is useful in decision making because It tells the user how much critical
BOS 15 B
each input is for the Output value.
BOS 16 A Expected Net present value = Net present value x Probability %
Following factor affects industry analysis
(a) Product Lifecycle
BOS 17 D
(b) Government Attitude
(c) State of Competition in the Industry
As per the Dow Jones Theory the Secondary movement of stock prices last from 3 weeks
BOS 18 B
to 3 months.
BOS 19 B An efficient capital market is one in which Security prices reflect available information.
BOS 20 C Inflation rate significantly influences the demand in consumer products industries
BOS 21 C Mixed Forecasting is not used for economic analysis
Drawback of the Anticipatory Surveys technique
(a) Survey results does not guarantee that intentions surveyed would materialize.
BOS 22 D
(b) They are not regarded as forecasts per se, as there can be a consensus approach by
the investor for exercising his opinion.
BOS 23 A Coupon Rate = Annual interest/ Face Value of bond
BOS 24 C Warrant is not a money market instrument
BOS 25 C Yield = Interest/ Market price
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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024

* Commercial papers (CP) are redemed at face value and interest is calculated on sale value.
* Net amount received on issue of CP =
BOS 26 A Face value of CP
Less: interest on CP sale value {FV*(rate/100+rate)}
Less: Intermediary charges on net receipt

* If face value of bond is not given then use the price of bond and assume the nearest 10,
100 or 1000 as face value.
BOS 27 A
* Coupan rate is calculated on face value fo bond and not price.
*First use NPV to check which investment is better
BOS 28 A Value of zero coupon bond = maturity value x PV factor @ year of maturity
BOS 29 C Arbitrage Pricing Theory was developed by Stephan Ross
BOS 30 A According to the CAPM, the intercept of Security Market Line (SML) should be equal to 0
Common hypothesis for Traditional and Modern Theories of Portfolio Management =
BOS 31 C portfolio reduces risk by diversification.
Stanadrd Deviation
BOS 32 D Coefficient of variation =
Expected Return/ Expected Cash Flow
Risk Premium is Extra return expected by the Investors as a reward for bearing extra
BOS 33 A
risk.
Securitization is the process of repackaging or rebundling of illiquid assets into
BOS 34 B
marketable securities.
The main objective of creating a Special Purpose Vehicle (SPV) in the securitization
BOS 35 C
process is to remove the asset from the balance sheet of the originator.
Open-ended schemes have an indefinite redemption period, while close-ended schemes have
BOS 36 D
a limited life.
BOS 37 D Embassy Office Parks launched India’s first Real Estate Investment Trust
The lower the Tracking Error of the Index Fund, higher the accuracy the more
BOS 38 C
predictable return is.
BOS 39 C Spot Market is a traditional method for an Indian farmer to sell wheat
In a future contract the term Basis is The difference between the prevailing spot price
BOS 40 A
and the futures price
Selling of Future Contracts in the share provides protection from a decrease in prices of
BOS 41 C
a share
When an investor buys back the same amount of futures contracts that he sold earlier is
BOS 42 A
called closing out the position
BOS 43 D In forward contract Both parties negotiate on quality, quantity, place, and price.
BOS 44 C Forwards are not traded in an exchange at all.
BOS 45 C Purpose of trading in futures = speculation and hedging.
BOS 46 B On buying a future contract, the risk is price will fall below the strike price

BOS 47 B Forward price = (Spot price - PV of dividend) 𝑥 𝑒 𝑝𝑒𝑟𝑖𝑜𝑑

BOS 48 D Value of forward contract = PV of (delivery price - forward price)

Put option = right to sell at exercise price
BOS 49 A
value of put = higher of {0 or (exercise price - spot price)}
BOS 50 B Gain on short sell = Sell price - closing price - dividend
BOS 51 D Delta, Gamma, Theta & Rho are Greek for Options Pricing.
*Covered call wirting means buying the share and selling the call
BOS 52 D
*Maximum possible loss for a covered call writer = Initial investment in share – Premium

BOS 53 A Forward price = (Spot price - PV of dividend) 𝑥 𝐶𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑖𝑛𝑔 𝑓𝑎𝑐𝑡𝑜𝑟

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
BOS 54 C Any commitment to disinvest upon the action of another party is called Short Call
BOS 55 D Currency buy is always at higher rate + margin (if any)
BOS 56 D Future xchange rate = Spot exchange rate + swap point
US dollar is quoted today as: spot $ 1 = INR 80 and six months forward $1 = INR 83. This
BOS 57 D
means $ is at premium
BOS 58 D net outright rate = spot rate + premium
𝐶ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑟𝑎𝑡𝑒
BOS 59 𝐹𝑜𝑟𝑤𝑎𝑟𝑑 𝑚𝑎𝑟𝑔𝑖𝑛 = (Multiply with period factor to make it annualized)
A 𝑠𝑝𝑜𝑡 𝑟𝑎𝑡𝑒

Circus Swap: Combination of two fixed floating currency swaps to fixed to fixed currency
BOS 60 B
swap
International Fisher Effect (IFE) = disparity between the exchange rate of two
BOS 61 C currencies is approximately equal to the difference between their countries' nominal
interest rates.
BOS 62 B Deficit in current account > Depreciation of home currency
To hedge against the exchange risk for a contract which is not finalised, its better to use
BOS 63 C
option contract as it settels in net.

BOS 64 B Risk of remittance is foreign currency can be hedged by buying the put of foreign currency

BOS 65 A Speculators can have a substantial impact on exchange rate through speculations.
BOS 66 C (Current future price - sell price) x no. of lot x lot quantity
Effect of foreign exchange risk on the parent firm’s cash flow are crucial in multinational
BOS 67 C capital budgeting
BOS 68 D Evaluation based on parent firms cash flows involves operating and financial cash flows
The primary difference between an interest rate swap contract and a forward contract
BOS 69 D can be on account of number of exchanges
BOS 70 B Plain Vanilla Swap have notional principal for the purpose of exchange of liabilities.
At the beginning of the swap, the initial amount of money the counterparties must
BOS 71 A
exchange = 0
Chop-Shop Method approach attempts to identify multi-industry companies that are
BOS 72 C undervalued and would have more value if separated from each other.
Replaceable Value method involves valuation as per determination of the cost of group of
BOS 73 C
assets and liabilities of equivalent company in the open market.
BOS 74 A Earning value = Net profit/ required rate as per CAPM
Vertical Merger happens when two companies that have buyer-seller relationship come
BOS 75 B
together

BOS 76 C The general reason for a divestiture, such as a sell-off/spin-off may be Reverse synergy

A merger that combines companies deal with the same product but in separate markets
BOS 77 A is called a market extension merger

BOS 78 D Government grants cannot be considered as a potential source of startup financing

In corporate restructuring when a company sells shares of the new company in market by
BOS 79 D
making a public offer is called Equity Carve Outs
Method to be followed by the firm to bootstrap is not a method to approach a pitch
BOS 80 D
presentation
vendor financing in start-up involves lending funds to customer so that he can purchase
BOS 81 D
products from the company itself.

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024

AFM Case Scenario Based MCQ Summary

Source Qn Ans Summary

Serial Correlation test: Price change in one period correlated with price change in some
RTP 82 A
other period. Price changes are considered to be serially independent

Run test: Analyzing the sequence of daily price changes, you count the number of runs
RTP 83 C
where price changes are consistently positive or negative.
Filter Rules test: If the price of stock increases by at least N% buy and hold it until its
RTP 84 B
price decreases by at least N% from a subsequent high.

The Filter Rule Test should not be applied for buy and hold strategy if the behavior of
RTP 85 D
stock price changes is random.
RTP 86 C Random Walk Theory: past price trends do not reliably predict future price movements
BOS 87 A Stock Value of bond/ conversion value = No. of share per bond x market price of share
Market Price − Straight Value
BOS 88 B % 𝑜𝑓 𝑑𝑜𝑤𝑛𝑠𝑖𝑑𝑒 𝑟𝑖𝑠𝑘 =
𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒
Market Price − Conversion Value
BOS 89 A 𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑃𝑟𝑒𝑚𝑖𝑢𝑚 =
𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑉𝑎𝑙𝑢𝑒
Market Price of bond
BOS 90 C 𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝑃𝑎𝑟𝑖𝑡𝑦 𝑃𝑟𝑖𝑐𝑒 =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒 𝑝𝑒𝑟 𝑏𝑜𝑛𝑑

BOS 91 B 𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑑𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛 = ξ𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒

BOS 92 D Portfolio return = sum of weight*stock return

Based on Standard Deviation (sd), the optimum investment will be decided as per return per
BOS 93 B
standard deviation (sd) = returm/ sd
On;y Pay Through Security (PTS) permits the SPV to reinvest surplus funds for short term
RTP 94 B
as per their requirement
RTP 95 B Originator = entity which sells assets collectively to Special Purpose Vehicle
RTP 96 C SPV = Entity which receive and hold the asset from originator
RTP 97 D RPA = collects the payment due from obligor(s) and passes it to SPV.
RTP 98 B Inverse relationship between Yeild to maturity (YTM) and Principle only securities
BOS 99 A Value of option contract on expiry = expiry price of stock - exercise price
BOS 100 A Gain/ loss on options = Value of option on expiry - Premium paid

BOS 101 D Real options are not traded in the market and are priced
EPS/BV/MP of Acquiree
BOS 102 B Swap ratio =
EPS/BV/MP of Acquiror

BOS 103 A Share to be issue to Acquiree = Swap ratiio x existing number of share of acquiree
EPS of mew form after merger = (Earning of acquiror + Earning of acquiree)/ (share of
BOS 104 C
acquiror + new shares issued to acquiree)
BOS 105 B Use EPS as swap ratio to ensure EPS is not diminished by the merger for any entity.
Investment
MTPS1 106 C Total NAV = 𝑥 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑁𝐴𝑉
NAV on date of investment

MTPS1 107 A Total yield = change in NAV + dividend

MTPS1 108 C Holding days = (Total yield/ Annual yield) x 365 Days
MTPS1 109 A Holding days = (Total yield/ Annual yield) x 365 Days
MTPS1 110 D Refer MCQ 7
MTPS1 111 B Refer MCQ 8
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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
MTPS1 112 C Refer MCQ 9
MTPS1 113 B Use face value as redemption value for calculating the yield
MTPS1 114 B Main factor for fixed income avenue security = Risk of Default

Main factor for fixed income security over a period of time by holding the security till its
MTPS1 115 A
maturity = Yield to maturity

If markest's efficiency is weak then price is not reflecting all the information and
MTPS1 116 B technical analysis is not correct so, fundamental analysis is best way for selection of
stocks
MTPS1 117 B Shares to be issued to acquiree = swap ratio x exiting share of acquiree
EPS of mew form after merger = (Earning of acquiror + Earning of acquiree)/ (share of
MTPS1 118 C
acquiror + new shares issued to acquiree)
MTPS1 119 C equivalent earnings per share of acquiree = EPS of merged firm x swap ratio for acquiree
MTPS1 120 C Price = EPS x PE
WACC = debt asset ratio x (Cost of debt after tax) + (1 - debt asset ratio) x (Cost of
MTPS2 121 A
equity)
EVA = NOPAT – (Invested Capital * WACC)
MTPS2 122 B
NOPAT = (EBIT - Tax%)
MTPS2 123 C Price = EPS x PE
MTPS2 124 C Market Cap = PAT x PE
MTPS2 125 B EPS = (EBIT - Interest - Tax)/ Number of share
Charges for delivery before due date of forward = Fixed Charges + Swap Difference +
MTPS2 126 D
Interest on Outlay of Fund
MTPS2 127 C Interest on Outlay of Fund will be charged at Prevailing Prime Lending Rate
MTPS2 128 B Swap difference = Sell rate for today - (Buy rate for today + + premium)
Interest on Outlay of Fund = Amount x (Sell rate for customer - buy rate for interbank) x
MTPS2 129 B
Interest rate x period
MTPS2 130 C Net inflow = (Amount x sell rate) - swap difference - interest
MTPS2 131 B Before applying Multilateral Netting it is necessary to apply Bilateral Netting
MTPS2 132 D Transfer after netting = Total payment = Total Receipt
MTPS2 133 B Net Payment/ Net Receipts = Total from paying view - Total from receiving view
MTPS2 134 B Net Payment/ Net Receipts = Total from paying view - Total from receiving view
Saving through netting = Transfer Charges x (Total transfers before netting - Net transfer
MTPS2 135 A
after netting)

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024

AFM Individual MCQ Compilation

Answers of MCQs are available on page 3

Source Chapter Qn Difficulty MCQ

The strategic financial management is _________
Financial
(a) backward looking
Policy and
BOS 1 S (b) report-focused discipline
Corporate
(c) forward-looking subject of financial management
Strategy
(d) All of the above
......................... is the springboard for wealth creation.
Financial
(a) Investment in highly risky securities.
Policy and
BOS 2 M (b) Capital investment
Corporate
(c) Foreign Exchange Risk Management
Strategy
(d) None of the above
The primary objective of investors in a world of economic
uncertainty is...................
(a) to select investment and financial opportunities that will give
Financial
them maximum expected returns at minimum risks.
Policy and
BOS 3 D (b) to select investment and financial opportunities that will give
Corporate
them maximum expected returns at maximum risks.
Strategy
(c) to select investment and financial opportunities that will give
them minimum expected returns at maximum risks.
(d) None of the above
............................is associated with diffusion of economic crisis
throughout a market, asset class or geographic region.
Security (a) Systematic Risk
BOS 4 S
Valuation (b) Unsystematic Risk
(c) Contagion Risk
(d) Credit Risk
Which type of risk occurs when a counter party fails to honour their
obligations?
Security (a) Interest Rate Risk
BOS 5 M
Valuation (b) Currency Risk
(c) Credit Risk
(d) Political Risk
Which type of risk is primarily faced by a company when it ventures
into a new industry or geographical area with completely different
laws and regulations?
Security
BOS 6 M (a) Operational Risk
Valuation
(b) Compliance Risk
(c) Currency Risk
(d) Financial Risk
............................is associated with diffusion of economic crisis
throughout a market, asset class or geographic region.
Security (a) Systematic Risk
BOS 7 D
Valuation (b) Unsystematic Risk
(c) Contagion Risk
(d) Credit Risk
One year VaR [Value at risk] of a portfolio is Rs. 10 crores with a
confidence level of 95%. This means............
Security
BOS 8 D (a) There is a 5% probability that the loss will be Rs. 10 crores at
Valuation
the end of the year
(b) The loss will not exceed Rs. 9.5 crores during valuation anytime

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
during the year
(c) The worst expected portfolio loss over one year will not exceed
Rs. 10 crore with 95% confidence
(d) The investor can presume that there is a 95% chance of loss
over one trading year will exceed Rs. 10 crore
Variance measures....
(a) How far each number in the set is from the mean.
Risk
BOS 9 S (b) The mean of a given data set.
Management
(c) Return on Investment
(d) Level of risk borne for every percent of expected return.
Expected cash flows are calculated as:
(a) Sum of likely cash flow of the project.
(b) Sum of likely cash flow of project multiplied by probability of
Risk
BOS 10 S respective cash flows.
Management
(c) Sum of likely cash flow of project divided by probability of cash
flow.
(d) none of these
Which of the following critical factor is generally overlooked by
capital budgeting decision makers.
Risk (a) Quantitative factors
BOS 11 S
Management (b) Qualitative factors
(c) Time factor
(d) Discounting factor
When the risk is high, the cash flow under certainty equivalent
coefficient is:
Risk (a) Higher
BOS 12 M
Management (b) Lower
(c) No impact
(d) None of the above
Scenario Analysis is considered under scenarios such as:
(a) Worst Case Scenario
Risk
BOS 13 M (b) Base Case Scenario
Management (c) Best Case Scenario
(d) All of the above
Certainty Equivalent approach is:
(a) Guaranteed return from an investment after adjusting for
Risk certainty equivalent coefficient.
BOS 14 M
Management (b) Return that is expected over the lifetime of a project.
(c) Equivalent to Net Present Value.
(d) An important component in Decision Tree Analysis
Sensitivity analysis is useful in decision making because:
(a) It shows the probabilities associated with each outcome.
(b) It tells the user how much critical each input is for the Output
Risk
BOS 15 D value.
Management
(c) It allows to calculate the probable results under different
scenarios.
(d) The results of Sensitivity Analysis are reliable.
The firm expects an NPV of Rs. 10,000 if the economy is
exceptionally strong (30% probability), an
NPV of Rs. 4,000 if the economy is normal (40% probability), and an
NPV of Rs. 2,000 if the economy is exceptionally weak (30%
Risk
BOS 16 D probability). Expected Net present value is _________.
Management
(a) Rs. 5,200
(b) Rs. 6,000
(c) Rs. 5,000
(d) Rs. 6,200

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
Which of the following factor affects industry analysis?
Advanced (a) Product Lifecycle
Capital (b) Government Attitude
BOS 17 S
Budgeting (c) State of Competition in the Industry
Decisions (d) All of these

As per the Dow Jones Theory the Secondary movement of stock

Advanced prices last from.................
Capital (a) one year to three years.
BOS 18 S
Budgeting (b) three weeks to three months.
Decisions (c) day to day.
(d) None of these
An efficient capital market is one in which..............
Advanced (a) Taxes are irrelevant.
Capital (b) Security prices reflect available information.
BOS 19 S
Budgeting (c) Securities always offer a positive rate of return to investors.
Decisions (d) Security prices are guaranteed (by the SEBI) to be fair

Which factor significantly influences the demand in consumer

Advanced products industries?
Capital (a) Interest rate
BOS 20 M
Budgeting (b) Discount rate
Decisions (c) Inflation rate
(d) None of the above
Which of the following technique is not used for economic analysis?
Advanced (a) Barometer/Indicator Approach
Capital (b) Economic Model Building Approach
BOS 21 M
Budgeting (c) Mixed Forecasting
Decisions (d) Economic Model Building Approach

Which of the following is a drawback of the Anticipatory Surveys

technique used in economic analysis?
(a) Survey results guarantee that intentions surveyed would
Advanced
materialize.
Capital
BOS 22 D (b) They are regarded as forecasts per se, as there can be a
Budgeting
consensus approach by the investor
Decisions
for exercising his opinion.
(c) Both of (a) and (b)
(d) None of the above
The annual interest of a bond divided by its face value is called the
bond's............................
Security (a) Coupon Rate
BOS 23 S
Analysis (b) Face value
(c) Maturity
(d) Yield to maturity
Which of the following is not a money market instrument?
(a) Commercial paper
Security (b) Participatory certificates
BOS 24 S
Analysis (c) Warrant
(d) Treasury Bills

A debenture of Rs. 10000 carrying 15% coupon rate is quoted in the

market at Rs.13500. The current
yield on this debenture will be:
Security
BOS 25 S (a) 13.50%
Analysis
(b) 15%
(c) 11.11%
(d) 10%
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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
A Ltd. issued commercial paper worth ₹ 10 crores as per the
following details:
Date of issue: 15th June, 2022
Maturity period: 73 days
No. of days in a year: 365 days
Interest rate: 15% p.a.
Security
BOS 26 D Intermediary charges: 0.1% of Net Receipts
Analysis
The net amount received by the company on such issue of CP shall be
approximately............
(a) ₹ 9,69,90,291
(b) ₹ 9,70,87,379
(c) ₹ 9,69,77,379
(d) ₹ 9,69,00,000
The following information is related to two bonds same in other
respects:
Price of Bond A = Rs. 10
Price of Bond B = Rs. 120
Coupon Rate of Bond A =14%
Coupon Rate of Bond B = 15%
Security If both the bonds are redeemable at a Premium of 10% after 2
BOS 27 D
Analysis years and the required yield on this
category of Bonds is 16% then best avenue for investment shall
be...............
(a) Bond A
(b) Bond B
(c) Any of the two Bonds
(d) Neither of the two Bonds
The value a zero coupon with a maturity of three years and a
maturity value of Rs 1,000 discounted
at 7% is
Security
BOS 28 D (a) Rs. 816.30
Analysis
(b) Rs. 901.94
(c) Rs. 966.18
(d) Rs. 1000
Arbitrage Pricing Theory was developed by................................
(a) William Sharpe
Portfolio
BOS 29 S (b) Harry Markowitz
Management
(c) Stephan Ross
(d) Black Scholes
According to the CAPM, the intercept of Security Market Line
(SML) should be equal to..........
Portfolio (a) zero.
BOS 30 M
Management (b) the expected risk premium on the market portfolio.
(c) the risk-free rate.
(d) the expected return on the market portfolio.
What is the common hypothesis for Traditional and Modern
Theories of Portfolio Management.
(a) Both approaches use statistical methods.
Portfolio
BOS 31 M (b) Both approaches are based on judgement.
Management
(c) Both approaches are based on hypothesis that a portfolio
reduces risk by diversification.
(d) None of these

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
Calculation of Coefficient of Variance depends on:
(a) Standard Deviation
Portfolio (b) Expected Return
BOS 32 M
Management (c) Expected cash flow
(d) All of the above

Risk Premium is:

(a) Extra rate of return expected by the Investors as a reward for
Portfolio bearing extra risk.
BOS 33 M
Management (b) Equivalent to the rate of Government Securities.
(c) Return provided to equity shareholders.
(d) Risk free rate of return.
..........is the process of repackaging or rebundling of illiquid assets
into marketable securities.
Securitizatio (a) Diversification
BOS 34 S
n (b) Securitization
(c) Structured finance
(d) Tokenization
The main objective of creating a Special Purpose Vehicle (SPV) in
the securitization process
is...................................
Securitizatio (a) to acquire legal and beneficial interest in the assets.
BOS 35 M
n (b) to issue securities to the investors.
(c) to remove the asset from the balance sheet of the originator.
(d) to write off the asset as bad debt from the balance sheet of the
originator.
The major difference between open-ended and close-ended mutual
fund schemes is that..............
(a) in Open Ended Schemes, investors can only make entry and exit
during pre-specified intervals.
(b) Close-ended schemes allow investors to redeem their
investments at any time.
BOS Mutual Funds 36 M
(c) Open-ended schemes have a limited life, while close-ended
schemes have an indefinite
redemption period.
(d) Open-ended schemes have an indefinite redemption period, while
close-ended schemes have a
limited life.
Which of the following Business Parks has launched India’s first Real
Estate Investment Trust
(ReIT)?
BOS Mutual Funds 37 M (a) Galaxy Business Parks
(b) DLF Cyber City
(c) Patni Knowledge Parks
(d) Embassy Office Parks
The lower the........... of the Index Fund, higher the accuracy the
more predictable return is.
(a) Alpha
BOS Mutual Funds 38 M
(b) Beta
(c) Tracking Error
(d) Exist Load
Which of the following is a traditional method for an Indian farmer
to sell wheat?
Derivatives
(a) Forward Contract
BOS Analysis and 39 S
(b) Future Contract
Valuation
(c) Spot Market
(d) Capital Market
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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
In a future contract the term Basis is...................
(a) The difference between the prevailing spot price and the futures
price.
Derivatives
(b) The difference between the current market price and the strike
BOS Analysis and 40 S
price.
Valuation
(c) The difference between the long position and the short position.
(d) The difference between the initial margin and the maintenance
margin
Which of the following position provides protection from a decrease
in prices of a share?
Derivatives
(a) Buying of Future Contracts in the share.
BOS Analysis and 41 S
(b) Buying Call Option in the share.
Valuation
(c) Selling of Future Contracts in the share.
(d) Selling Put Option in the share.
When an investor buys back the same amount of futures contracts
that he sold earlier is
Derivatives called.....................
BOS Analysis and 42 S (a) closing out the position.
Valuation (b) going long of the futures.
(c) opening a new position.
(d) None of these
Which of the following is true regarding a forward contract?
(a) It is standardized.
Derivatives
(b) The contracting parties negotiate only on the price.
BOS Analysis and 43 M
(c) The contracting parties negotiate only on quantity and quality.
Valuation
(d) Both parties negotiate on quality, quantity, place, and price.

Which among the following derivative product is not traded in an

exchange at all?
Derivatives
(a) Futures
BOS Analysis and 44 M
(b) Options
Valuation
(c) Forwards
(d) None of these
What is the purpose of trading in futures?
(a) Only for speculation.
Derivatives
(b) Only for hedging.
BOS Analysis and 45 M
(c) Both for speculation and hedging.
Valuation
(d) Only for arbitraging.

ABC Masala Co. purchase jeera to make its products. The company is
concerned that prices may rise
prior to building inventory for festivals sales. Analysts project that
price per quintal could vary from
Rs. 52,000 to Rs. 70,000. A September futures contract can be
obtained with a Rs. 65,000 purchase
Derivatives
prices. What is ABC's risk in this situation?
BOS Analysis and 46 D
(a) Coca prices will rise above Rs. 65,000 and Tingley will purchase
Valuation
its coca at a price of Rs. 65,000.
(b) Coca prices will decline below Rs. 65,000 and Tingley will have to
purchase coca at Rs. 65,000.
(c) Coca prices will hit Rs. 65,000 and the contract was a waste of
time.
(d) ABC Co. has no risk in this situation.

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
The spot price of an investment is Rs. 3,000 and the risk-free rate
for all maturities (with continuous
compounding) is 10% p.a.. Suppose the asset provides an income of
Rs. 200 at the end of the first
Derivatives year and at the end of the second year, then three-year forward
BOS Analysis and 47 D price shall be …...............
Valuation (e0.10 = 1.1052, e0.20 = 1.2214 and e0.30= 1.3499)
(a) Rs. 1,967
(b) Rs. 3,584
(c) Rs. 4,515
(d) Rs. 4,050
A short forward contract on share of A Ltd. that was negotiated
some time ago will expire in 3 months
and has a delivery price of Rs. 4,000. The current forward price for
three-month forward contract
Derivatives is Rs. 4,200 and the 3-month risk-free interest rate (with monthly
BOS Analysis and 48 D compounding) is 6%. The value of
Valuation the same short forward contract will be….........
(a) Rs. 200
(b) - Rs. 200
(c) Rs. 197.03
(d) - Rs. 197.03
A put option on a company’s stock has an exercise price of Rs. 200.
On the delivery date, the stock is
trading at Rs. 240 per share. What should the investor who has paid
Derivatives
Rs. 20 for the option do?
BOS Analysis and 49 D
(a) Not exercise the option and lose Rs. 20.
Valuation
(b) Not exercise the option and lose Rs. 60.
(c) Exercise the option and gain Rs. 20.
(d) Exercise the option and gain Rs. 40.
Mr. A a speculator shorts 1000 shares of X Ltd. when the share
price was Rs. 50 and closes out the
position after 3 months when the share price was Rs. 43. The
Derivatives company pays a dividend of Rs. 3 per
BOS Analysis and 50 D share during the 3 months. The gain of Mr. A will be ….
Valuation (a) Rs. 1,000
(b) Rs. 4,000
(c) Rs. 7,000
(d) Rs. 3,000
Which amongst the following is not a Greek for Options Pricing
Derivatives (a) Delta
BOS Analysis and 51 D (b) Gamma
Valuation (c) Theta
(d) Kho
The maximum possible loss for a covered call writer is………………..
(a) Option premium.
Derivatives
(b) Current price of the underlying asset.
BOS Analysis and 52 D
(c) Strike price.
Valuation
(d) Initial investment Net of Premium

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
The spot price of an investment asset that provides no income is Rs.
3000 and the risk-free rate for
all maturities (with yearly compounding) is 10%. The three- year
Derivatives forward price of same investment
BOS Analysis and 53 D shall be….........
Valuation (a) Rs. 3,993
(b) Rs. 4,050
(c) Rs. 4,020
(d) Rs. 4,034
As per Real Option in Capital Budgeting any commitment to disinvest
upon the action of another party
Derivatives is called _________.
BOS Analysis and 54 D (a) Long Call
Valuation (b) Long Put
(c) Short Call
(d) Short Put
Suppose Hari approaches a forex dealer who loads INR 1.00 margin
on the interbank rate for travel
related remittances. If in the interbank market the USD is quoted
Foreign
at INR 85.46 - 85.50 then Mr.
Exchange
BOS 55 S Hari
Exposure &
(a) can buy travel card at INR 84.46.
Risk Mgt
(b) can buy travel card at INR 84.50.
(c) can buy travel card at INR 86.46.
(d) can buy travel card at INR 86.50.
On October 10, 2022, the Spot exchange rate is INR / USD = INR
66.2525- INR 67.5945 and the
Foreign two months swap points are 125 and 195. What would be the foreign
Exchange exchange rate after 2 months?
BOS 56 S
Exposure & (a) INR / USD = INR 66.2620 – INR 67.6070
Risk Mgt (b) INR / USD = INR 66.2400 – INR 67.5750
(c) INR / USD = INR 66.2330 – INR 67.5820
(d) INR / USD = INR 66.2650 – INR 67.6140
US dollar is quoted today as: spot $ 1 = INR 80 and six months
Foreign forward $1 = INR 83.
Exchange (a) This means $ is at discount
BOS 57 S
Exposure & (b) This means future of rupee is uncertain
Risk Mgt (c) This means future of rupee is unclear
(d) This means $ is at premium
If USD/INR spot is trading at 83.2000 and one year Swap
annualized premium is trading at 6.8%
Foreign
then what would be the net outright rate
Exchange
BOS 58 M (a) 77.4500
Exposure &
(b) 77.5524
Risk Mgt
(c) 88.4500
(d) 88.8576
US dollar is quoted today as: spot $ 1 = Rs. 80 and six months
forward $1 = Rs. 84. The annualized
Foreign
forward margin is......
Exchange
BOS 59 M (a) 10%
Exposure &
(b) 5%
Risk Mgt
(c) 3%
(d) 6%

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
Combination of two fixed floating currency swaps to fixed to fixed
Foreign currency swap is called?
Exchange (a) Vanilla Swap
BOS 60 M
Exposure & (b) Circus Swap
Risk Mgt (c) Extendible Swap
(d) Roller-Coaster Swaps
...................Theory substantiates that the expected disparity
between the exchange rate of two
Foreign currencies is approximately equal to the difference between their
Exchange countries' nominal interest rates.
BOS 61 M
Exposure & (a) Interest Rate Parity
Risk Mgt (b) Purchasing Power Parity
(c) International Fisher Effect (IFE)
(d) None of these
How does a deficit in current account affect the exchange rate of a
Foreign country?
Exchange (a) Appreciation of home currency
BOS 62 M
Exposure & (b) Depreciation of home currency
Risk Mgt (c) No impact on the exchange rate
(d) It depends on the size of the deficit
T & L Ltd has submitted its bid along with bid bond guarantee of its
bank for Green-house gas construction project in Australia with
expected cash flows spread over next 3 years. Though its pricing is
very competitive, it is not sure of securing it due to other factors.
Foreign
But if secured, it has a huge exchange risk in the invoicing currency
Exchange
BOS 63 D viz.: AUD. It can opt for the following derivative product
Exposure &
to protect itself.
Risk Mgt
(a) Forward contract
(b) Futures contract
(c) Option contract
(d) Swaps
An Indian exporter expecting a remittance of USD 5 Million,
planning to hedge his position by option contracts should...........
Foreign
(a) buy Call Option in USD.
Exchange
BOS 64 D (b) buy Put Option in USD.
Exposure &
(c) buy Call Option in INR.
Risk Mgt
(d) buy Put Option in INR.

How can expectations affect the exchange rate of a currency?

(a) Speculators can have a substantial impact on exchange rate
Foreign through speculations.
Exchange (b) The current spot/forward rates are often used to develop
BOS 65 D
Exposure & forecasts.
Risk Mgt (c) A combination of forecasting techniques is used to develop
forecasts.
(d) Historical data is used to predict future values.
A Trader sold 20 lots of USD/INR in an exchange (1 lot = $ 1000)
via currency futures. He dealt at a future price of INR 78/$ for 3
Foreign months. Currently future price is trading at INR 82/$. The M2M
Exchange (Mark to Market) of trader in the exchange shall be.....................
BOS 66 D
Exposure & (a) INR 4000
Risk Mgt (b) INR 8000
(c) INR 80000
(d) INR 40000

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
Which of the following factors are crucial in multinational capital
budgeting?
International
(a) Cash flows from domestic projects.
BOS Financial 67 M
(b) Profits remitted to the host country.
Management
(c) Effect of foreign exchange risk on the parent firm’s cash flow.
(d) Changes in rates of inflation in the parent country.
What is the difference between evaluating a project-based cash
flows and parent firms cash flows?
(a) Evaluation based on parent firms cash flows requires competition
with existing local firms.
International
(b) Evaluation based on parent firms cash flows involves financial
BOS Financial 68 D
cash flows only.
Management
(c) Evaluation based on parent firms cash flows eliminates problems
associated with fluctuating exchange rate changes.
(d) Evaluation based on parent firms cash flows involves operating
and financial cash flows.
The primary difference between an interest rate swap contract and
a forward contract can be on account of........................
Interest Rate
(a) underlying
BOS Risk 69 M
(b) time of payment
Management
(c) daily marking to the market
(d) number of exchanges
Which of the following contract involves the notional principal for
the purpose of exchange of liabilities.
Interest Rate
(a) Currency Swap
BOS Risk 70 D
(b) Plain Vanilla Swap
Management
(c) Forward Contract
(d) None of these
Suppose A Ltd. is entering into an interest rate swap with a notional
principal of Rs. 10,00,00,000. At the beginning of the swap the
Interest Rate initial amount of money the counterparties must exchange............
BOS Risk 71 D (a) Rs. 0
Management (b) Rs. 5,000,000
(c) The future value of Rs.10,00,00,000
(d) Rs. 10,00,00,000 discounted
.............................approach attempts to identify multi-industry
companies that are undervalued and
would have more value if separated from each other.
Business
BOS 72 S (a) Economic Value Added Method
Valuation
(b) Market Value Added Method
(c) Chop-Shop Method
(d) None of the above
.....................method involves valuation as per determination of the
cost of group of assets and liabilities
of equivalent company in the open market.
Business
BOS 73 M (a) Net Asset Value
Valuation
(b) Net Realizable Value
(c) Replaceable Value
(d) None of the above

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
X Ltd. made a net profit of Rs. 50,00,000 and incurred expenses of
Rs. 15,00,000. The number of issued Equity shares is 10,00,000. The
company has a debt of Rs. 5,00,000. The market related details
are as follows: Rf = 10% Market Rate of Return = 15% β = 1.2 The
Business per share Earning Value of the company shall be..................................
BOS 74 D
Valuation (a) Rs. 31.25
(b) Rs. 21.88
(c) Rs. 312.50
(d) Rs. 218.75
Which type of merger happens when two companies that have buyer-
seller relationship (or potential
Mergers,Acqu
buyer-seller relationship) come together?
isitions &
BOS 75 S (a) Horizontal Merger
Corporate (b) Vertical Merger
Restructuring
(c) Conglomerate Merger
(d) Congeneric Merger
The general reason for a divestiture, such as a sell-off or spin-off
Mergers,Acqu may be..........................
isitions & (a) Synergy
BOS 76 M
Corporate (b) Economics of scale
Restructuring (c) Reverse synergy
(d) None of these
A merger that combines companies deal with the same product but
Mergers,Acqu in separate markets is called a.............
isitions & (a) market extension merger.
BOS 77 D (b) pure conglomerate merger.
Corporate
Restructuring (c) vertical merger.
(d) reverse merger

Which of the following can not be considered as a potential source

of startup financing?
Startup (a) Bank loans
BOS 78 M
Finance (b) Personal financing
(c) Crowdfunding
(d) Government grants
In corporate restructuring when a company sells shares of the new
company in market by making a
public offer is called_________.
Startup
BOS 79 M (a) Sell off
Finance
(b) Spin Off
(c) Split up
(d) Equity Carve Outs
Which among the following is not a method to approach a pitch
presentation?
Startup (a) Introduction of the team
BOS 80 D
Finance (b) The market size of the product
(c) Explaining the approach to be followed to solve a problem
(d) Method to be followed by the firm to bootstrap
The vendor financing in startup involves..................
(a) borrowing funds from customer to lend funds to the company.
(b) borrowing funds from customer to purchase products from the
Startup company.
BOS 81 D
Finance (c) lending funds to customer so that he can purchase products from
different vendor.
(d) lending funds to customer so that he can purchase products from
the company itself.

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024

AFM Case Scenario Based MCQ Compilation

Answers of MCQs are available on page 6

You are a financial analyst at a prominent investment firm and have been tasked with empirically verifying the weak
form of Efficient Market Hypothesis (EMH) Theory for the XYZ Stock Index, a collection of diverse stocks. You
decided to conduct three different tests to assess whether the stock market follows the principles of the weak
form of EMH.

Test 1

For the past five years, you collected daily price changes of the stocks in the XYZ Stock Index. You calculated
correlation coefficients for different lag periods and analyzed whether past price changes exhibit any significant
correlation with future price changes. You considered price changes to be serially independent. The results
indicated that most auto correlation coefficients are close to zero and statistically insignificant, suggesting those
past price changes do not predict future price changes.

Test 2

You further investigated the randomness of price changes in the XYZ Stock Index. Analyzing the sequence of daily
price changes, you count the number of runs where price changes are consistently positive or negative. Upon
comparing the observed number of runs with the expected number based on randomness, you find that they align
closely, supporting the idea that price changes follow a random pattern.

Test 3

To examine the efficacy of trading strategies based on historical price trends, you implemented a simple trading
rule for the XYZ Stock Index. The rule involves buying when the price crosses a moving average of 5% threshold
and selling when it crosses another 7% threshold. Over a period of testing, you computed the returns generated by
the trading strategy. The results revealed that the returns are not consistently better than random chance,
implying that past price trends do not reliably predict future price movements.

Conclusion:

After conducting the three tests the evidence supports the weak form of Efficient Market Theory for the XYZ
Stock Index you concluded that past price trends do not reliably predict future price movements.

Source Chapter Qn MCQ

Test 1 is …………………
Advanced (a) Serial Correlation test
Capital (b) Filter Rules test
RTP 82
Budgeting (c) Run test
Decisions (d) Variance Ratio test

Test 2 is ………………….
Advanced (a) Serial Correlation test
Capital (b) Filter Rules test
RTP 83
Budgeting (c) Run test
Decisions (d) Variance Ratio test

Test 3 is ………………
Advanced (a) Serial Correlation test
Capital (b) Filter Rules test
RTP 84
Budgeting (c) Run test
Decisions (d) Variance Ratio test

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
The Filter Rule Test should not be applied for buy and hold strategy
Advanced if…………….
Capital (a) the behavior of stock price changes is predictable.
RTP 85
Budgeting (b) the behavior of stock price changes is dependent on past trends.
Decisions (c) the behavior of stock price changes is correlated.
(d) the behavior of stock price changes is random.
Results of your studies support the……………
Advanced (a) Semi-strong EMH Theory
Capital (b) Strong EMH Theory
RTP 86
Budgeting (c) Random Walk Theory
Decisions (d) Markowitz Theory

The data given below relates to a convertible bond of X Ltd.:

Face value Rs. 450

Coupon rate 15%
No. of shares per bond 25
Market price of share Rs. 20
Straight value of bond Rs. 400
Market price of convertible bond Rs. 550
Source Chapter Qn MCQ
The stock value of bond would be …………
(a) Rs. 500
BOS Security Analysis 87 (b) Rs. 400
(c) Rs. 550
(d) Rs. 450

The percentage of downside risk based on market price of

convertible bond is …………
(a) 10%
BOS Security Analysis 88 (b) 27.27%
(c) 18.18%
(d) 11.11%

The conversion premium is ………….

(a) 10%
BOS Security Analysis 89 (b) 27.27%
(c) 18.18%
(d) 11.11%

The conversion parity price of the stock is …………..

(a) Rs. 25
BOS Security Analysis 90 (b) Rs. 20
(c) Rs. 22
(d) Rs. 24

Mr. A is interested in investing Rs. 1,00,000 for which he is considering following three alternatives:

(i) Invest Rs. 1,00,000 in Mutual Fund X (MFX)

(ii) Invest Rs. 1,00,000 in Mutual Fund Y (MFY)

(iii) Portfolio - Invest Rs. 60,000 in Mutual Fund X (MFX) and Rs. 40,000 in Mutual Fund Y (MFY)

Average annual return earned by MFX and MFY is 12% and 11% respectively. Risk free rate of return is

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
8% and market rate of return is 10%.

Covariance of returns of MFX, MFY and market portfolio Mix are as follow:

Particulars MFX MFY Portfolio

MFX 4.400 4.300 3.370
MFY 4.300 4.200 2.800
Portfolio 3.370 2.800 4.200

Source Chapter Qn MCQ

Standard Deviation of MFX is ……………
(a) 2.0736
Portfolio (b) 2.0976
BOS 91
Management (c) 1.8358
(d) 2.0494

Portfolio return would be ……………..

(a) 11.00%
Portfolio (b) 12.00%
BOS 92
Management (c) 11.50%
(d) 11.60%

Based on Standard Deviation, the optimum investment for Mr. A would be …………….
(a) Portfolio
Portfolio (b) All investment in MFX
BOS 93
Management (c) All investment in MFY
(d) Both MFY and mix are indifferent

Grow More Ltd. an NBFC is in the need of funds and hence it sold its receivables to MAC Financial Corporation
(MFC) for ₹ 100 million. MFC created a trust for this purpose called General Investment Trust (GIT) through which
it issued securities carrying a different level of risk and return to the investors. Further, this structure also
permits the GIT to reinvest surplus funds for short term as per their requirement.

MFC also appointed a third party, Safeguard Pvt. Ltd. (SPL) to collect the payment due from obligor(s) and passes it
to GIT. It will also follow up with defaulting obligor and if required initiate appropriate legal action against them.

Source Chapter Qn MCQ

The securitized instrument issued for ₹ 100 million by the GIT falls under
category of ……….
(a) Pass Through certificate (PTCs)
RTP Securitization 94 (b) Pay Through Security (PTS)
(c) Stripped Security
(d) Debt Fund.

In the above scenario, the Originator is………………….

(a) Grow More Ltd.
RTP Securitization 95 (b) MAC Financial Corporation (MFC)
(c) General Investment Trust (GIT)
(d) Safeguard Pvt. Ltd. III.

In the above scenario, the General Investment Trust (GIT) is a/an………………….

(a) Obligor
RTP Securitization 96 (b) Originator
(c) Special Purpose Vehicle (SPV)
(d) Receiving and Paying Agent (RPA)

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
In the above scenario, the Safeguard Pvt. Ltd. (SPL) is a/an………………
(a) Obligor
RTP Securitization 97 (b) Originator
(c) Special Purpose Vehicle (SPV)
(d) Receiving and Paying Agent (RPA)

Which of the following statement holds true?

(a) When Yield to Maturity in market rises, prices of Principle Only (PO) Securities
tend to rise.
(b) When Yield to Maturity in market rises, prices of Principle Only (PO)
Securities tend to fall.
RTP Securitization 98
(c) When Yield to Maturity in market falls, prices of Principle Only (PO) Securities
tend to fall.
(d) When Yield to Maturity in market falls, prices of Principle Only (PO) Securities
remain the same.

X and Y are two friends. Since Y has earned a lot of profit from trading in financial derivative market, X is also
considering speculating on Gamma Corporation’s shares which is currently trading at ₹ 700 per share through taking
positions in options in stocks of same company. Accordingly, X took following contract positions in the options on
Gama Corporation’s stock:

i) Purchasing one contract of 2-month call option with a premium of ₹ 35 and an exercise price of ₹ 750.
ii) Purchasing one contract of 2-month put option with a premium of ₹ 25 and an exercise price of ₹ 600.

After some time, trading in Option Market and understanding the nitty-gritties of same, X being CEO in an
organization advised his team to implement the concept of Financial Options in the Capital Budgeting decisions called
‘Real Option’.

Source Chapter Qn MCQ

Assuming that the contract size of each option contract is 100 and the
price of Gama Corporation’s share after two months falls to ₹ 550, the net
pay-off of X will be………
Derivatives Analysis
BOS 99 (a) ₹ 1,000 loss
and Valuation
(b) ₹ 1,000 profit
(c) ₹ 3,000 profit
(d) ₹ 3,000 loss
The per share price of Gama Corporation’s stock after 2 months at which X
shall be at Break Even is…..
(a) ₹ 540
Derivatives Analysis
BOS 100 (b) ₹ 600
and Valuation
(c) ₹ 625
(d) ₹ 785

Which of the following statement is false regarding Real Options?

(a) Real Options methodology is an approach to capital budgeting that relies
on Option Pricing theory to evaluate projects.
(b) Real options approach is intended to supplement, and not replace, capital
Derivatives Analysis budgeting analyses
BOS 101 based on standard Discounted Cash Flow (DCF) methodologies.
and Valuation
(c) Real options are different from financial options as their periods start
from the end of 1st year and are higher than financial options.
(d) Real options are normally traded in the market and are priced.

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
P Ltd. is studying the possible acquisition of Q Ltd. by way of merger. The following data are available:

Firm After-tax earnings No. of equity shares Market price per share Book value per share
P Ltd. 10,00,000 2,00,000 75 210
Q Ltd. 3,00,000 50,000 60 105
The merger shall be gone through by exchange of equity shares and the exchange ratio is set according to different
weights assigned to different basis as mentioned below :-

EPS 50%

Market Price 25%

Book Value 25%

Source Chapter Qn MCQ

The swap ratio based on assigned weights shall be........................................
Mergers,Acquisitions (a) 0.825
BOS & Corporate 102 (b) 0.925
Restructuring (c) 0.952
(d) 0.752
Based on swap ratio as per assigned weights the total number of shares
issued by P Ltd to Q Ltd. shall be............
Mergers,Acquisitions (a) 46250
BOS & Corporate 103 (b) 41250
Restructuring (c) 47600
(d) 37600
Post merger the EPS of the P Ltd. shall be.................
Mergers,Acquisitions (a) 5.39
BOS & Corporate 104 (b) 5.25
Restructuring (c) 5.28
(d) 5.47
In case Q Ltd. wants to be sure that its EPS is not diminished by the
merger, the relevant exchange ratio to achieve the same objective should
Mergers,Acquisitions (a) 0.83
BOS & Corporate 105 (b) 1.20
Restructuring (c) 1.30
(d) 1.10

Mr. Y has invested in the three mutual funds (MF) as per the following details:

Particulars MF ‘X’ MF ‘Y’ MF ‘Z’

Amount of Investment 4,00,000 8,00,000 4,00,000
Net Assets Value (NAV) at the time of purchase 10.3 10.1 10
Dividend Received up to 31.03.2023 9000 0 6000
NAV as on 31.03.2023 10.35 10 10.3
Effective Yield per annum as on 31.03.2023 (percent) 9.66 -11.66 24.15
Assume 1 Year = 365 days

Source CS Qn MCQ
Total NAV of MF ‘Y’ as on 31.03.2023 would be approximately ……………
(a) 401941.73
(b) 412000.00
MTP S1 1 106
(c) 792079.20
(d) 82500.00

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
Total Yield of MF ‘X’ in terms of would be approximately ……………..
(a) 10941.73
MTP S1 1 107 (b) 7,920.80
(c) 18,000.00
(d) 12450.45
Number of days for which MF ‘X’ is held would be approximately………….
(a) 31 Days
MTP S1 1 108 (b) 68 Days
(c) 103 Days
(d) 85 Days
Number of days for which MF ‘Y’ is held would be………….
(a) 31 Days
MTP S1 1 109 (b) 68 Days
(c) 103 Days
(d) 85 Days

ABC Ltd. is planning to expand its business and therefore raising fund by issuing a convertible bond of 10 crore. An
investor “Mr. X” is interested to invest in the bond of ABC Ltd. Mr. X has following data related to the convertible
bond. The data given below relates to a convertible bond

Face value 250

Coupon rate 12%
No. of shares per bond 20
Market price of share 12
Straight value of bond 235
Market price of convertible bond 265
Maturity 5 Years

Source CS Qn MCQ
The percentage of downside risk of the bond is approximately……………..
(a) 10.42%
(b) 6.38%
MTP S1 2 110
(c) 2.13%
(d) 12.77%

The conversion premium in percentage term of the bond is……………..

(a) 12.77%
(b) 10.42%
MTP S1 2 111
(c) 2.18%
(d) 13.45%

The conversion parity price of the stock is…………….

(a) ` 11.75
(b) ` 12.00
MTP S1 2 112
(c) ` 13.25
(d) ` 12.50

If he wants a yield of 15% the maximum price he should be ready to pay for is…………….
(a) 217.41
(b) 224.81
MTP S1 2 113
(c) 240.00
(d) 232.32

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
Suppose you are a financial consultant and following 3 clients have approached to you seeking advise on the
investment to be made in securities. All these clients have different background and risk appetite as well as
perception to the market.

❖ Client A wants to invest in Fixed income avenues and therefore he is looking at the credit rating of the securities
as well as financial ratios such as interest coverage, earning power etc and the general prospect of the industry.

❖ Client B wants to earn a fixed income over a period of time by holding the security till its maturity.

❖ Client C wants to earn more by taking more risk. Therefore, he is more interested to invest in stocks. He believes
that Price reflects all information found in the record of past prices and volumes.

On the basis of above information, choose the most appropriate answer to the MCQs.

Source CS Qn MCQ
The main factor to be considered in selecting fixed income avenue for client A shall
be………………..
MTP (a) Yield to maturity
3 114
S1 (b) Risk of Default
(c) Tax Shield
(d) Liquidity
The main factor that have to be evaluated in the selection of Bond for Client B shall
be………………..
MTP (a) Yield to maturity
3 115
S1 (b) Risk of Default
(c) Tax Shield
(d) Liquidity
If Weak form efficiency is prevailing in the market then which approach is best for selection
of Equity Shares?
MTP (a) Technical Analysis
3 116
S1 (b) Fundamental Analysis
(c) Random selection Analysis
(d) None of the above.

AES Ltd. wants to acquire DNF Ltd. and has offered a swap ratio of 1:2 (0.5 shares for every one share of DNF
Ltd.). Following information is provided

AES Ltd. DNF Ltd.

Profit after tax 36,00,000 7,20,000
Equity shares outstanding (Nos.) 12,00,000 3,60,000
PE Ratio 10 times 7 times
Market price per share 30 14

Source CS Qn MCQ
The number of equity shares to be issued by AES Ltd. for acquisition of DNF Ltd. would
be………………
MTP (a) 1,68,000
4 117
S1 (b) 1,80,000
(c) 2,40,000
(d) 3,00,000
The EPS of AES Ltd. after the acquisition would be………………
(a) ` 2
MTP
4 118 (b) ` 3
S1
(c) ` 3.13
(d) ` 4.00

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024
The equivalent earnings per share of DNF Ltd. would be………..
(a) ` 1
MTP
4 119 (b) ` 1.50
S1
(c) ` 1.57
(d) ` 2.00
If AES Ltd. PE multiple remains unchanged then its expected market price per share after
the acquisition would be………………
MTP (a) ` 14
4 120
S1 (b) ` 30
(c) ` 31.30
(d) ` 40.00

During one business meeting at XYZ Ltd., one of the member pointed out that while evaluating the performance of
any company one should not only see its Operating Income but should also analyse its Capital structure as well.
Weighted Average Cost of Capital changes on the basis of capital structure keeping all other factors unchanged.

He presented data relating to 3 companies Alpha Ltd., Beta Ltd. and Gama Ltd. whose operating Income are equal,
but their capital structure is different.

The following information relating to these 3 companies is as follows:

Alpha Ltd. Beta Ltd. Gama Ltd.

Total invested capital 20,00,000 20,00,000 20,00,000
Debt/Assets ratio 0.8 0.5 0.2
Shares outstanding 61,000 83,000 1,00,000
Pre tax Cost of Debt 0.16 0.13 0.15
Cost of Equity 0.26 0.22 0.2
Operating Income (EBIT) 5,00,000 5,00,000 5,00,000
The Tax rate is uniform 35% in all cases. The industry PE ratio is 11X.

Source CS Qn MCQ
The weighted average cost of capital of Alpha Ltd. shall approximately be ………………..
(a) 13.520%
MTP S2 1 121 (b) 15.225%
(c) 17.950%
(d) 18.000%
The Economic Valued Added (EVA) for Beta Ltd. is…………….
(a) ` 54600 Thousand
MTP S2 1 122 (b) ` 20500 Thousand
(c) (-) ` 34000 Thousand
(d) ` 21500 Thousand
The price per share of Gama Ltd. shall be ……………..
(a) ` 28.60
MTP S2 1 123 (b) ` 31.90
(c) ` 31.46
(d) ` 29.45
The estimated market capitalisation for Alpha Ltd. is…………….
(a) ` 26,47,700 Thousand
MTP S2 1 124 (b) ` 31,46,000 Thousand
(c) ` 17,44,600 Thousand
(d) ` 23,73,800 Thousand
Earning per share of Beta Ltd. is……………..
(a) ` 2.60
MTP S2 1 125 (b) ` 2.90
(c) ` 2.86
(d) ` 2.15

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024

On 1 October 2023 Mr. X an exporter enters into a forward contract with a BNP Bank to sell US$ 1,00,000 on 31
December 2023 at ` 85.40/$. However, due to the request of the importer, Mr. X received the amount on 28
November 2023. Mr. X requested the bank the take delivery of the remittance on 30 November 2023 i.e., before
due date. The inter-banking rates on 28 November 2023 was as follows:

Spot 85.22/85.27

One Month Premium 10/15

Note: (1) Consider 365 days in a year.

(2) Prevailing Prime Lending Rate is 12%

Based on above case scenario, choose the most appropriate answer of the following:

Source CS Qn MCQ
The bank may accept the request of customer of delivery before due date of forward
contract provided the customer is ready to bear the loss if any consisting of…………
MTP (a) Swap Difference
2 126 (b) Interest on Outlay of Fund
S2
(c) Swap Difference Plus Interest on Outlay of Fund
(d) Fixed Charges Plus Swap Difference and Interest on Outlay of Fund
In case of early delivery bank shall charge interest on outlay of fund at a rate not less
than……………..
MTP (a) 8%
2 127
S2 (b) 10%
(c) 12%
(d) 18%
Swap Difference for US$ 1,00,000 is………………..
(a) ` 5,000
MTP
2 128 (b) ` 20,000
S2
(c) ` 18,000
(d) ` 8,000
Interest on outlay of funds shall be approximately………………….
(a) ` 92 payable by X
MTP
2 129 (b) ` 183 payable by X
S2
(c) ` 183 payable by Bank
(d) ` 122 payable by Bank
Net inflow to Mr. X is approximately……………..
(a) ` 85,42,183
MTP
2 130 (b) ` 85,20,000
S2
(c) ` 85,19,817
(d) ` 85,40,000

A US parent company has subsidiaries in France, Germany, UK and Italy. The amounts due to and from the affiliates
is converted into a common currency viz. US dollar and entered in the following matrix.

Inter Subsidiary Payments Matrix (US $ Thousands)

Paying affiliate
France Germany UK Italy Total
France --- 80 120 200 400
Receiving Germany 120 --- 80 160 360
affiliate UK 160 120 --- 140 420
Italy 200 60 120 --- 380
Total 480 260 320 500 1560

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 AFM All MCQs Compilation and Summary from BOS portal, RTP and MTPs for May 2024

Source Chapter Qn MCQ

Before applying Multilateral Netting it is necessary to apply……………….
(a) Unilateral Netting
MTP
3 131 (b) Bilateral Netting
S2
(c) Multilateral Netting
(d) Interest Rate Swapping
Through Multinational Netting these transfers will be reduced to ……………………….
(a) $ 50,000
MTP
3 132 (b) $ 100,000
S2
(c) $ 150,000
(d) $ 200,000
The Net Payment/ Net Receipts for France after netting off shall be…………….
(a) Net Receipt $ 40,000
MTP
3 133 (b) Net Payment $ 80,000
S2
(c) Net Payment $ 40,000
(d) Net Receipt $ 80,000
The Net Payment/ Net Receipts for Italy after netting off shall be…………….
(a) Net Receipt $ 60,000
MTP
3 134 (b) Net Payment $ 120,000
S2
(c) Net Payment $ 60,000
(d) Net Receipt $ 120,000
Suppose if the transfer charges are 0.01% of the amount transferred then by
applying multilateral netting techniques there will be reduction in overall cost of
transfer by …………..
MTP
3 135 (a) US $ 136
S2
(b) US $ 156
(c) US $ 1,360
(d) US $ 1,560

Page 28