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June 2026Q. 6A(iii)5 marksSyllabus 2022
(iii)Decisions on investments are determined by various factors like risk involved, return, purpose, period etc. Do you think there are differences between investment and speculation? If so, what are the differences ? Give examples.
Investment and speculation though look alike in several ways there are many differences between them.
Basis for Comparison
Investment
Speculation
Meaning
The purchase of an asset with
Speculation is an act of conducting a
the hope of getting returns is
risky financial transaction, in the
called investment.
hope of substantial profit.
Basis for decision
Basis for decision
Hearsay, technical charts and
Fundamental factors, i.e.
market psychology.
performance of the company.
Time horizon
Long term
Short term
Risk involved
Moderate risk
High risk
Intent to profit
Changes in value
Changes in prices
Expected rate of return
Modest rate of return
High rate of return
Funds
An investor uses his own funds
A speculator uses borrowed funds.
Income
Stable
Uncertain and Erratic
Behavior of participants
Conservative and Cautious
Daring and Careless
Examples for investments are
bank deposits, post office schemes etc. Examples for
speculation are stock markets trade, mutual funds, derivatives etc.
Source: ICSI Guideline Answers, June 2026, Q. 6A(iii) (Syllabus 2022).
December 2025Q. 6A(ii)5 marksSyllabus 2022
(ii)Classify the following risks as systematic and unsystematic :
–Changes in laws/regulations
–A foreign government expropriates the assets of a specific company
–Interest rate hikes
–A company is forced to recall one of its products
–Changes in foreign policy
–Volatility in currency values
–The entry of a new competitor into a market
–A company is found to have prepared fraudulent financial statements
–Tax Reforms
–A union targets a company for an employee walk out.
Systematic Risk:
l Changes in laws/regulations,
l Interest rate hikes,
l Changes in foreign policy,
l Volatility in currency values,
l Tax reforms.
Unsystematic Risk:
l A foreign government expropriates the assets of a specific company,
l A company is forced to recall one of its products,
l The entry of a new competitor into a market,
l A company is found to have prepared fraudulent financial statements,
l A union targets a company for an employee walkout.
Source: ICSI Guideline Answers, December 2025, Q. 6A(ii) (Syllabus 2022).
December 2024Q. 77 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Beta is an indicator of ..................... of the security. It measures the sensitivity of a security’s return with respect to market return.
(A)Unsystematic risk
(B)Systematic risk
(C)Time value
(D)Economic growth
Answer: (B) Systematic risk
Source: ICSI Guideline Answers (answer key), December 2024, Q. 77 (Corporate and Management Accounting paper, Syllabus 2017).
December 2024Q. 24 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Beta International is an all-equity firm that has projected earnings before interest and taxes of ₹ 4,97,000 forever. The current cost of equity is 16% and the tax rate is 34%. The company is in the process of issuing 2.5 million value of bonds at par that carry 6% annual coupon. What is the levered value of the firm on the basis of M.M. Hypothesis ?
(A)₹ 39,31,375
(B)₹ 48,40,400
(C)₹ 46,68,750
(D)₹ 39,60,125
Answer: (C) ₹ 46,68,750
Source: ICSI Guideline Answers (answer key), December 2024, Q. 24 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 32 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is not one of the three fundamental methods of firm valuation ?
(A)Market Share
(B)Discounted Cash flow
(C)Balance sheet - where the firm is valued in terms of its net assets
(D)Income or earnings - where the firm is valued on some multiple of accounting income or earnings.
Answer: (A) Market Share
Source: ICSI Guideline Answers (answer key), December 2024, Q. 32 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 35 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Zero Coupon bonds are bonds issued at ................ and redeemed at par.
(A)Discount to face value plus premium
(B)Premium to Face value less discount
(C)Discount to face value
(D)Par
Answer: (C) Discount to face value
Source: ICSI Guideline Answers (answer key), December 2024, Q. 35 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 41 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
An equity share of ₹ 100 face value is expected to earn an annual dividend of 11 and this share can be sold at price of ₹ 180 at the end of year. If the shareholder expects a yield of 12% on its investment, calculate the price of equity share for which it should be bought.
(A)₹ 168.35
(B)₹ 170.53
(C)₹ 160.71
(D)₹ 100.90
Answer: (B) ₹ 170.53
Source: ICSI Guideline Answers (answer key), December 2024, Q. 41 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 53 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Return from listed security is in two forms :
(A)One is stock split and second is dividend
(B)One is interest and second is dividend 56.
(C)One is dividend and second is capital appreciation in price
(D)One is interest and second is capital appreciation in price
Answer: (C) One is dividend and second is capital appreciation in price
Source: ICSI Guideline Answers (answer key), December 2024, Q. 53 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 54 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Standard deviation is expressed :
(A)Always in percentage
(B)In terms of amount
(C)In terms of rupee risk
(D)In same units in respect of which the deviation is computed
Answer: (D) In same units in respect of which the deviation is computed
Source: ICSI Guideline Answers (answer key), December 2024, Q. 54 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 56 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
A portfolio’s expected return is 11%. Its variance of risk, i.e., risk squared is 184% and the investors’ risk tolerance is 42.
The risk penalty and utility respectively will be :
(A)4.38% and 6.62%
(B)5.42% and 5.52%
(C)4.68% and 6.32%
(D)None of the above
Answer: (A) 4.38% and 6.62%
Source: ICSI Guideline Answers (answer key), December 2024, Q. 56 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 58 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Yogesh invest ₹ 1,45,000 in shares of Maa Ltd., a listed company. At the end of period investment value is 1,72,000. He gets dividend of ₹ 16,500. Return from investment is :
(A)9.59%
(B)11.38%
(C)18.62%
(D)30%
Answer: (D) 30%
Source: ICSI Guideline Answers (answer key), December 2024, Q. 58 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 59 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Return of last 5 years of listed security is 13.2%, 19.8%, 18%, 15% & 17%. Five years ago, price of the security was bought for ₹ 130 per share. What is its holding period return ?
(A)83%
(B)113%
(C)115.31%
(D)140.91%
Answer: (C) 115.31%
Source: ICSI Guideline Answers (answer key), December 2024, Q. 59 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 60 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
According to ........... theory, it is useless to engage in Technical Analysis of securities.
(A)Efficient Market theory
(B)Dow Jones theory
(C)Random Walk theory
(D)None of the above
Answer: (C) Random Walk theory
Source: ICSI Guideline Answers (answer key), December 2024, Q. 60 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 6(a)5 marksSyllabus 2022
( a )Calculate Holding period returns for the following security :
Particulars
(₹)
Investment made on April 1,2022
50,000/-
Dividends received during the year
2,500/-
Investment sold on March 31,2023
75,000/-
Income Tax Rate on Dividends
30%
Income Tax Rate on Capital Gains
20%
Calculation of Holding Period Return
Gross Receipt
Income Tax
Income Tax
Net Receipt
Rate
( ₹ )
( ₹ )
( ₹ )
Dividends
2,500
30%
750
1,750
Capital Gains (₹ 75,000 – ₹ 50,000/-)
25,000
20%
5,000
20,000
Total Return
21,750
Total Investment = ₹ 50,000/-
Holding Period Return = Net Receipt/Total Investment
Source: ICSI Guideline Answers, December 2024, Q. 6(a) (Syllabus 2022).
December 2024Q. 6A(ii)5 marksSyllabus 2022
(ii)What are Primary Trends in terms of the “Dow Theory” related to Technical Analysis ?
Short note on Primary Trends
Technical analysis is an analysis for forecasting the direction of security prices through the study of past market data primarily price and volume. Dow Jones is one of the earliest theories of technical analysis.
The primary trend lasts from one to three years. Over this period, the markets exhibit definite upward or downward movement which is punctuated by shorter spans of trend reversal in the opposite directions. The trend reversal is called the secondary trend. Primary trend is indicative of the overall pattern of movement.
In Dow theory, the primary trend is the major trend of the market, which makes it the most important one to determine. This is because the overriding trend is the one that affects the movements in stock prices. The primary trend will also impact the secondary and minor trends within the market.
Bullish Phase
Bearish Phase
In a bullish phase, after each peak, there is a
In a bearish phase, the overall trend is that of
fall but the subsequent rise is higher than the
decline in share values. After each fall, there is
previous one.
slight rise but the subsequent fall is even sharper.
Source: ICSI Guideline Answers, December 2024, Q. 6A(ii) (Syllabus 2022).
June 2024Q. 79 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
An investor wants to invest in an equity share of ABC Ltd. The company’s last EPS was ₹ 40 per share and the dividend payout ratio is 35%. The required rate of return from equity investment is 20%. The intrinsic value of equity is :
(A)₹ 200
(B)₹ 40
(C)₹ 70
(D)₹ 100
Answer: (C) ₹ 70
Source: ICSI Guideline Answers (answer key), June 2024, Q. 79 (Corporate and Management Accounting paper, Syllabus 2017).
June 2024Q. 86 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
An investor wants to invest in the equity shares of XYZ Ltd for one year. The company is expected to declare a dividend of ₹ 3 per share. Further, a leading security analyst has projected the year-end target price of this company’s share at ₹ 160. Assume that the required rate of return is 10%. The fair price of the share is :
(A)111
(B)145.45
(C)145
(D)148.45
Answer: (D) 148.45
Source: ICSI Guideline Answers (answer key), June 2024, Q. 86 (Corporate and Management Accounting paper, Syllabus 2017).
June 2024Q. 88 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Systematic risk of a security is indicated by :
(A)Rho coefficient
(B)Gamma coefficient
(C)Alpha coefficient
(D)Beta coefficient
Answer: (D) Beta coefficient
Source: ICSI Guideline Answers (answer key), June 2024, Q. 88 (Corporate and Management Accounting paper, Syllabus 2017).
June 2024Q. 3 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is an example of unsystematic risk ?
(A)Interest rate hikes
(B)Political instability and flight of capital
(C)A company is forced to recall one of its products
(D)Failure of banks
Answer: (C) A company is forced to recall one of its products
Source: ICSI Guideline Answers (answer key), June 2024, Q. 3 (Financial and Strategic Management paper, Syllabus 2017).
June 2024Q. 6 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Zero Coupon bonds are bonds issued at ................ and redeemed at par.
(A)Face value to discount
(B)Discount to face value plus premium
(C)Par to discounted value
(D)Discount on face value
Answer: (D) Discount on face value
Source: ICSI Guideline Answers (answer key), June 2024, Q. 6 (Financial and Strategic Management paper, Syllabus 2017).
June 2024Q. 44 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is not a characteristic of Systematic Risk ?
(A)Macro in nature
(B)External in nature
(C)Uncontrollable by an organization
(D)None of the above
Answer: (D) None of the above
Source: ICSI Guideline Answers (answer key), June 2024, Q. 44 (Financial and Strategic Management paper, Syllabus 2017).
June 2024Q. 46 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
How long does primary trends lasts for ?
(A)One to three years
(B)Three to five weeks
(C)Four to six months
(D)Two to ten weeks
Answer: (A) One to three years
Source: ICSI Guideline Answers (answer key), June 2024, Q. 46 (Financial and Strategic Management paper, Syllabus 2017).
June 2024Q. 47 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
................. hypothesis holds that security prices adjust rapidly to all publicly available information such as functional statements and reports and investment advisory reports etc.
(A)The Strong Form of Efficiency
(B)Semi-strong form of Efficiency
(C)The Weak Form theory
(D)All of the above
Answer: (B) Semi-strong form of Efficiency
Source: ICSI Guideline Answers (answer key), June 2024, Q. 47 (Financial and Strategic Management paper, Syllabus 2017).
June 2024Q. 49 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
An investor is holding 100 shares of Right Choice Ltd. for last 5 years that he bought for ₹ 52,500. During the holding period, he received dividends worth ₹ 10,250 and currently the shares can be sold for ₹ 650 each. What is the annualized rate of return (%) on his investments ?
(A)43.33
(B)8.67
(C)17.33
(D)19.52
Answer: (B) 8.67
Source: ICSI Guideline Answers (answer key), June 2024, Q. 49 (Financial and Strategic Management paper, Syllabus 2017).
June 2024Q. 50 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
A portfolio manager has invested in a particular fund which has generated a return of 12% with a standard deviation of 3.6%. If the risk-free rate of return in the market is 6%, the Sharpe ratio of the fund will be :
(A)0.75%
(B)1.16%
(C)1.10%
(D)1.67%
Answer: (D) 1.67%
Source: ICSI Guideline Answers (answer key), June 2024, Q. 50 (Financial and Strategic Management paper, Syllabus 2017).
June 2024Q. 53 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The first ratio to measure risk-adjusted return and one of the most referenced risk/return measures used in finance was introduced by :
(A)William F. Sharpe
(B)Modigliani and Merton H. Miller
(C)William J. Baumol
(D)James E. Walter
Answer: (A) William F. Sharpe
Source: ICSI Guideline Answers (answer key), June 2024, Q. 53 (Financial and Strategic Management paper, Syllabus 2017).
June 2024Q. 6A(ii)5 marksSyllabus 2022
(ii)What is Systematic Risk ? Describe its types.
Systematic Risk
Systematic risk is due to the influence of external factors on an organization. Such factors are normally uncontrollable from an organization’s point of view. Systematic risk is a macro in nature as it affects a large number of organizations operating under a similar stream or same domain. It cannot be planned by the organization. In this way economic, political and sociological changes are sources of systematic risk.
For example, if an economy moves into recession or if there is a political upheaval, it will cause the prices of nearly all the securities, whether bond or equity to decline. Firms with high systematic risk tend to be those whose sales, profits and stock prices follow the general trend in the level of economic or stock market activity. These may include companies that deal in basic industrial goods like automobile manufactures.
Types of systematic risk:
1.Interest rate risk
Interest-rate risk is the variation in the single period rates of return caused by the fluctuations in the market interest rate. It particularly affects debt securities as they carry the fixed rate of interest.
2.Market risk
Market risk is associated with consistent fluctuations seen in the trading price of any particular shares or securities. It arises due to rise or fall in the trading price of listed shares or securities in the stock market.
3.Purchasing power or inflationary risk
Purchasing power risk is also known as inflation risk. It is so, since it emanates (originates) from the fact that it affects a purchasing power adversely. It is not desirable to invest in securities during an inflationary period.
Source: ICSI Guideline Answers, June 2024, Q. 6A(ii) (Syllabus 2022).
December 2023Q. 86 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Given : Earnings per share – ₹ 40 Dividend payout ratio – 60% Required rate of return from equity – 30% Growth rate of dividend – 15% Intrinsic value of equity is :
(A)₹ 80
(B)₹ 92
(C)₹ 160
(D)₹ 184
Answer: (D) ₹ 184
Source: ICSI Guideline Answers (answer key), December 2023, Q. 86 (Corporate and Management Accounting paper, Syllabus 2017).
December 2023Q. 97 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
As per Capital Asset Pricing Model (CAPM), which of the following factor causes systematic risk ?
(A)Inflation
(B)Tax policy
(C)Gross Domestic Product (GDP)
(D)All the above
Answer: (D) All the above
Source: ICSI Guideline Answers (answer key), December 2023, Q. 97 (Corporate and Management Accounting paper, Syllabus 2017).
December 2023Q. 98 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
The actual return provided by a security is 24% whereas expected return is 22.4%. Its risk free rate is 8% and return on a broad market index is 20%. The beta of the security, if it is correctly priced in the market under CAPM, is :
(A)1.0
(B)1.2
(C)1.5
(D)2.4
Answer: (B) 1.2
Source: ICSI Guideline Answers (answer key), December 2023, Q. 98 (Corporate and Management Accounting paper, Syllabus 2017).
December 2023Q. 99 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Arbitrage Pricing Theory is based on the assumption that :
(A)Intention of all market participants is wealth maximization
(B)Market participants will bring back market equilibrium
(C)There are transaction costs
(D)Short-selling is not possible
Answer: (B) Market participants will bring back market equilibrium
Source: ICSI Guideline Answers (answer key), December 2023, Q. 99 (Corporate and Management Accounting paper, Syllabus 2017).
December 2023Q. 10 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
.................. are usually taken as proxy for risk-free return as it is issued by the Government and duration is not very long.
(A)Commercial Papers
(B)Commercial Bills
(C)Treasury Bills
(D)Certificate of Deposits
Answer: (C) Treasury Bills
Source: ICSI Guideline Answers (answer key), December 2023, Q. 10 (Financial and Strategic Management paper, Syllabus 2017).
December 2023Q. 21 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
A company’s beta is 1.5. The market return is 15% and the risk-free rate is 10%. What is the expected return of the company’s stock based on CAPM ?
(A)17.5%
(B)15%
(C)11.5%
(D)25%
Answer: (A) 17.5%
Source: ICSI Guideline Answers (answer key), December 2023, Q. 21 (Financial and Strategic Management paper, Syllabus 2017).
December 2023Q. 25 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which among the following is not a systematic risk ?
(A)Interest Rate Risk
(B)Purchasing Power Risk
(C)Market Risk
(D)Business Risk
Answer: (D) Business Risk
Source: ICSI Guideline Answers (answer key), December 2023, Q. 25 (Financial and Strategic Management paper, Syllabus 2017).
December 2023Q. 33 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Bharat Ltd is an all-equity firm that has projected earnings before interest and taxes of ₹ 5,50,000 forever. The current cost of equity is 15% and tax rate 30%. The company is in the process of issuing ₹ 17,00,000 of bonds at par that carry an 8% annual coupon. What is the value of the firm after issuing bonds if the EBIT increases by 50% after bond issue ?
(A)45,60,133
(B)49,15,333
(C)39,16,667
(D)42,25,600
Answer: (B) 49,15,333
Source: ICSI Guideline Answers (answer key), December 2023, Q. 33 (Financial and Strategic Management paper, Syllabus 2017).
December 2023Q. 34 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
............ assumes that co-movement between stocks is due to change or movement in the market index.
(A)Single Index Model
(B)Multi Index Model
(C)Markowitz model of Risk-Return Optimization
(D)Capital Assets Pricing Model
Answer: (A) Single Index Model
Source: ICSI Guideline Answers (answer key), December 2023, Q. 34 (Financial and Strategic Management paper, Syllabus 2017).
June 2023Q. 31 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which among the following is generally not incorporated in set of analysis in a project report ?
(A)Market Analysis
(B)Technical Analysis
(C)Financial Analysis
(D)Fundamental Analysis
Answer: (D) Fundamental Analysis
Source: ICSI Guideline Answers (answer key), June 2023, Q. 31 (Financial and Strategic Management paper, Syllabus 2017).
June 2023Q. 55 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Portfolio theory was originally proposed by :
(A)Kenneth Fisher
(B)Harry Markowitz
(C)Henry Fayol
(D)Peter Drucker
Answer: (B) Harry Markowitz
Source: ICSI Guideline Answers (answer key), June 2023, Q. 55 (Financial and Strategic Management paper, Syllabus 2017).
June 2023Q. 57 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is located on the horizontal axis of the Security Market Line ?
(A)Beta
(B)Standard Deviation
(C)Expected Return
(D)None of the above
Answer: (A) Beta
Source: ICSI Guideline Answers (answer key), June 2023, Q. 57 (Financial and Strategic Management paper, Syllabus 2017).
June 2023Q. 58 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which one of the following is not a key difference between Capital Market Line (CML) & Security Market Line (SML) ?
(A)CML uses systematic risk, while SML uses total risk
(B)CML uses efficient portfolio only, while SML uses both efficient & inefficient portfolio
(C)Capital Market Line is a proportional combination between Risk free Rate of Return and Market Return, while SML graphs all portfolios and securities which lie on and off the Capital Market Line
(D)None of the above
Answer: (A) CML uses systematic risk, while SML uses total risk
Source: ICSI Guideline Answers (answer key), June 2023, Q. 58 (Financial and Strategic Management paper, Syllabus 2017).
December 2022Q. 100 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
From the following, find out the expected rate of return when the security is correctly priced :
Expected rate on market portfolio 16%
Risk free rate of return 7%
Beta factor of the security 1.2
(A)24.4%
(B)26.2%
(C)15.4%
(D)17.8%
Answer: (D) 17.8%
Source: ICSI Guideline Answers (answer key), December 2022, Q. 100 (Corporate and Management Accounting paper, Syllabus 2017).
December 2022Q. 12 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is not an example of Systematic Risk ?
(A)Changes in Laws/Regulations
(B)Natural Disasters
(C)Entry of a new competitor in market
(D)Volatility in Currency Value
Answer: (C) Entry of a new competitor in market
Source: ICSI Guideline Answers (answer key), December 2022, Q. 12 (Financial and Strategic Management paper, Syllabus 2017).
December 2022Q. 55 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Assume risk free rate of return and expected return on market portfolio to be 10% and 15% respectively. If the standard deviatiaon of an asset is 2.8%, market standard deviation is 2.3% and co-relation coefficient of a portfolio with market is 0.8, the expected rate of return on the portfolio will be :
(A)14.85%
(B)15.87%
(C)16.63%
(D)17.83%
Answer: (A) 14.85%
Source: ICSI Guideline Answers (answer key), December 2022, Q. 55 (Financial and Strategic Management paper, Syllabus 2017).
December 2022Q. 58 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
An investor bought a share for ₹ 50. The company paid a dividend of ₹ 3 for the current period. Long-term growth rate is expected to be 12% and expected rate of return is 15%. The current market price of share on the basis of fundamental valuation approach will be :
(A)₹ 45
(B)₹ 86
(C)₹ 112
(D)₹ 101
Answer: (C) ₹ 112
Source: ICSI Guideline Answers (answer key), December 2022, Q. 58 (Financial and Strategic Management paper, Syllabus 2017).
December 2022Q. 59 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Who proposed the Portfolio Theory originally ?
(A)Eliot Wave
(B)Kenneth Fisher
(C)Harry Markowitz
(D)Neil Woodford
Answer: (C) Harry Markowitz
Source: ICSI Guideline Answers (answer key), December 2022, Q. 59 (Financial and Strategic Management paper, Syllabus 2017).
December 2022Q. 60 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
An investment in a mutual fund has generated a return of 15% with a standard deviation of 5. The risk free rate of return in the market is 8% and standard deviation to security index is 12. What is the Sharpe Ratio for the fund ?
(A)1.4%
(B)3.2%
(C)1.6%
(D)1.78%
Answer: (A) 1.4%
Source: ICSI Guideline Answers (answer key), December 2022, Q. 60 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 94 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Beta of market portfolio is always ............. .
(A)0
(B)1
(C)Less than 1
(D)More than 1
Answer: (B) 1
Source: ICSI Guideline Answers (answer key), June 2022, Q. 94 (Corporate and Management Accounting paper, Syllabus 2017).
June 2022Q. 95 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
The relationship between risk and return established by the security market line is called as :
(A)Economic value model
(B)Earnings based model
(C)Arbitrage pricing model
(D)Capital asset pricing model
Answer: (D) Capital asset pricing model
Source: ICSI Guideline Answers (answer key), June 2022, Q. 95 (Corporate and Management Accounting paper, Syllabus 2017).
June 2022Q. 96 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Under Arbitrage Pricing Theory, it is assumed that the markets are frictionless because of the fact that there are :
(A)No transaction costs
(B)No taxes
(C)Infinite number of securities are available
(D)All of the above
Answer: (D) All of the above
Source: ICSI Guideline Answers (answer key), June 2022, Q. 96 (Corporate and Management Accounting paper, Syllabus 2017).
June 2022Q. 97 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
An investor expects a dividend of ₹ 8 per share for each of 5 years and a selling price of ₹ 120 at the end of 5th year. If his required rate of return is 10%, the share is a good buy now at a price of (PVFA 10, 5 = 3.791 and PVF 10, 5 = 0.621) :
(A)₹ 100
(B)₹ 108
(C)₹ 110
(D)₹ 115
Answer: (A) ₹ 100
Source: ICSI Guideline Answers (answer key), June 2022, Q. 97 (Corporate and Management Accounting paper, Syllabus 2017).
June 2022Q. 23 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
A bond carries a coupon rate of 12.4% p.a. compounded quarterly. What will be effective yield on the bond ?
(A)12.79%
(B)12.89%
(C)12.99%
(D)13.09%
Answer: (C) 12.99%
Source: ICSI Guideline Answers (answer key), June 2022, Q. 23 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 32 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Jones, a HNI, wants to invest in shares of XYZ Ltd., a major component manufacturing company. Apart from looking into internal and external information about the company, Jones should look into which of the following tools, so that he can arrive at his investment decision ?
(A)Earnings per share
(B)Price/Earnings Ratio
(C)Dividend Yield
(D)All of the above
Answer: (D) All of the above
Source: ICSI Guideline Answers (answer key), June 2022, Q. 32 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 34 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is correct ?
(A)Systematic risk it uncontrollable by an organization and is micro in nature
(B)Systematic risk is controllable by an organization and is macro in nature
(C)Systematic risk is uncontrollable by an organization and is macro in nature
(D)None of the above
Answer: (C) Systematic risk is uncontrollable by an organization and is macro in nature
Source: ICSI Guideline Answers (answer key), June 2022, Q. 34 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 35 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is not a type of Systematic Risk ?
(A)Interest Rate Risk
(B)Market Risk
(C)Business Risk
(D)Purchase Risk
ICSI did not treat any of the given options as correct.
Source: ICSI Guideline Answers (answer key), June 2022, Q. 35 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 37 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Standard deviation is a measure of how each possible outcome deviates from the expected value. In this context, which of the following statements is correct?
(A)The higher is the value of deviation, the lower is the risk associated with portfolio
(B)The lower is the value of deviation, the lower is the risk associated with portfolio
(C)Value of deviation has nothing to do with portfolio risk
(D)None of the above
Answer: (B) The lower is the value of deviation, the lower is the risk associated with portfolio
Source: ICSI Guideline Answers (answer key), June 2022, Q. 37 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 38 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is not considered as the assumption of Markowitz Model of Portfolio Analysis ?
(A)Investors consider each investment alternative as being represented by a probability distribution of expected returns over some holding period
(B)Individuals do not estimate risk on the basis of variability of expected returns
(C)Individuals do not base decisions solely on expected returns and variance only
(D)Both (B) and (C)
Answer: (D) Both (B) and (C)
Source: ICSI Guideline Answers (answer key), June 2022, Q. 38 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 40 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is not an advantage of Capital Asset Pricing Model ?
(A)It considers only systematic risk reflecting a reality in which most investors have diversified portfolios from which unsystematic risk has been essentially eliminated
(B)Theoretically derived relationship between required return and systematic risk, which has been subjected to frequent empirical research and testing
(C)It is not superior to WACC in providing discount rate for being used in investment appraisals
(D)Much better method of calculating the cost of equity than the dividend growth model, in that it explicitly considers a company’s level of systematic risk relative to stock market as a whole
Answer: (C) It is not superior to WACC in providing discount rate for being used in investment appraisals
Source: ICSI Guideline Answers (answer key), June 2022, Q. 40 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 41 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Beta is a factor of which of the following :
(A)Standard Deviation of security/portfolio
(B)Standard Deviation of market
(C)Correlation between security and market
(D)All of the above
Answer: (D) All of the above
Source: ICSI Guideline Answers (answer key), June 2022, Q. 41 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 42 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is/are features of Capital Market Line ?
(A)Portfolio is assumed to be efficient
(B)It assumes no unsystematic risk
(C)It estimates the return for a portfolio based on the total risk route
(D)All of the above
Answer: (D) All of the above
Source: ICSI Guideline Answers (answer key), June 2022, Q. 42 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 91 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
‘‘When a business is non-operating or has been generating losses, and the company’s focus is holding investments or real estate.’’ Which method of valuation is best used in this case?
(A)Discounted cash flow model
(B)Asset approach
(C)Earning based model
(D)Capital asset pricing model
Answer: (B) Asset approach
Source: ICSI Guideline Answers (answer key), December 2021, Q. 91 (Corporate and Management Accounting paper, Syllabus 2017).
December 2021Q. 10 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
To determine the co-efficient of variation, the formula is :
Standard Deviation
(A)X 100 Median Standard Deviation
(B)X 100 Mode Standard Deviation
(C)X 100 Mean Mean
(D)X 100 Standard Deviation
Answer: (C) X 100 Mean Mean
Source: ICSI Guideline Answers (answer key), December 2021, Q. 10 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 47 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Risk can be classified into :
(A)Planned, Unplanned
(B)Regular, Irregular
(C)Organized, Unorganized
(D)Systematic, Unsystematic
Answer: (D) Systematic, Unsystematic
Source: ICSI Guideline Answers (answer key), December 2021, Q. 47 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 49 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
From the following calculate coefficient of correlation of x and y :
Covariance between x and y=
–8
Standard deviation of x
= 2
Standard deviation of y
= 4
(A)–1.0
(B)1.0
(C)0.5
(D)– 0.5
Answer: (A) –1.0
Source: ICSI Guideline Answers (answer key), December 2021, Q. 49 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 50 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
If the stocks are independent of each other, the correlation coefficient would be:
(A)Zero
(B)+1
(C)–1
(D)0.50
Answer: (A) Zero
Source: ICSI Guideline Answers (answer key), December 2021, Q. 50 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 51 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Utility of the portfolio can be measured through :
(A)Risk squared/Risk tolerance
(B)Risk tolerance/Risk squared
(C)Expected return – Risk penalty
(D)Risk penalty – Expected return
Answer: (C) Expected return – Risk penalty
Source: ICSI Guideline Answers (answer key), December 2021, Q. 51 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 52 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
If the risk penalty is 4.50% and portfolio’s expected return is 13%, what will be the utility of the portfolio?
(A)8.5%
(B)2.89%
(C)0.35%
(D)–8.5%
Answer: (A) 8.5%
Source: ICSI Guideline Answers (answer key), December 2021, Q. 52 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 56 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Ravi and Sam invested in equity market ₹ 2.00 lakh each and Ravi invested in manufacturing sector and Sam invested in IT sector at the end of the year overall yield from manufacturing sector 4.75% and IT sector 7.25%. The alternatively Bank interest yield of 6.75% in term deposits.
Calculate loss or gain to Ravi and Sam.
(A)Loss 1,000, Loss - 1,000
(B)Gain 2,000, Gain - 2,000
(C)Loss 4,000, Gain - 1,000
(D)Gain 2,500, Gain - 1,000
Answer: (C) Loss 4,000, Gain - 1,000
Source: ICSI Guideline Answers (answer key), December 2021, Q. 56 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 60 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
From the following information, calculate the expected rate of return of a portfolio:
Risk free rate of interest 10%
Expected return of market portfolio 16%
Standard deviation of an asset 2.8%
Market standard deviation 2.3%
Correlation co-efficient of portfolio with market 0.8%
(A)15.82%
(B)13.94%
(C)10.00%
(D)16.00%
Answer: (A) 15.82%
Source: ICSI Guideline Answers (answer key), December 2021, Q. 60 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 84 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
When the required rate of return is equal to the coupon rate, then the market value of a bond is ..............................
(A)Above Face Value
(B)Face Value
(C)Below Face Value
(D)Book Value
Answer: (B) Face Value
Source: ICSI Guideline Answers (answer key), June 2021, Q. 84 (Corporate and Management Accounting paper, Syllabus 2017).
June 2021Q. 32 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Shyamali Limited is currently financed with ₹ 5,00,000 of 10% Debenture and 15,00,000 of Equity share. The equity share has a beta of 1.5, and the risk free rate is 6%, and the market risk premium is 4%. The tax rate is 20%. What is the WACC of Shyamali Limited ?
(A)11%
(B)12%
(C)13%
(D)10%
Answer: (A) 11%
Source: ICSI Guideline Answers (answer key), June 2021, Q. 32 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 53 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Beta of the Market portfolio generally is :
(A)Zero
(B)1
(C)2
(D)Negative
Answer: (B) 1
Source: ICSI Guideline Answers (answer key), June 2021, Q. 53 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 57 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Tansen Ltd. has a beta of 0.80. If the expected market return is 21.50 and the risk free rate of return is 9.50%. Using CAPM mode to calculate the appropriate required rate of return :
(A)19.10%
(B)20.10%
(C)20.30%
(D)22.00%
Answer: (A) 19.10%
Source: ICSI Guideline Answers (answer key), June 2021, Q. 57 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 58 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is most closely associated with the terms ‘primary trend,’ ‘intermediate trend,’ and ‘short-term trend’ ?
(A)Trend line
(B)Dow Theory
(C)Candlestick chart
(D)Bar chart
Answer: (B) Dow Theory
Source: ICSI Guideline Answers (answer key), June 2021, Q. 58 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 60 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is not a basic principle of the Dow Theory?
(A)A bear market is established when the Dow Jones Industrial Average is moving down
(B)There is usually a positive relationship between a trend and the volume of shares traded
(C)The financial market has three distinct types of movements : the primary trend, the intemediate trend, and short-term trends
(D)The intermediate trend has duration of three weeks to six months
Answer: (A) A bear market is established when the Dow Jones Industrial Average is moving down
Source: ICSI Guideline Answers (answer key), June 2021, Q. 60 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 65 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Risk-Free Rate of Interest on Govt. Treasury Bonds 5.5%, Average Return on Market Portfolio 18%. Beta is 1.8. Security is said to be overpriced, if actual return is :
(A)29%
(B)28%
(C)27%
(D)None of the above
Answer: (C) 27%
Source: ICSI Guideline Answers (answer key), December 2020, Q. 65 (Corporate and Management Accounting paper, Syllabus 2017).
December 2020Q. 70 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Risk-Free Rate of Interest on Govt. Treasury Bonds 5%, Average Return on Market Portfolio 17.5%. What must be the beta, if the security is correctly priced with actual return of 25%?
(A)1.2
(B)1.3
(C)1.5
(D)1.6
Answer: (D) 1.6
Source: ICSI Guideline Answers (answer key), December 2020, Q. 70 (Corporate and Management Accounting paper, Syllabus 2017).
December 2020Q. 81 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
The relationship between the risk and return established by the security market line is called ................
(A)Earning based model
(B)Arbitrage pricing theory
(C)Economic value added
(D)Capital asset pricing model
Answer: (D) Capital asset pricing model
Source: ICSI Guideline Answers (answer key), December 2020, Q. 81 (Corporate and Management Accounting paper, Syllabus 2017).
December 2020Q. 87 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Beta of Market portfolio is always .........
(A)0
(B)1
(C)Less than 1
(D)More than 1
Answer: (B) 1
Source: ICSI Guideline Answers (answer key), December 2020, Q. 87 (Corporate and Management Accounting paper, Syllabus 2017).
December 2020Q. 45 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Speculator is a person :
(A)Who acts in a risky financial transaction, in the hope of substantial profit
(B)Who acts in a less risky financial transaction, in the hope of substantial profit
(C)Who uses only his own fund to make profit
(D)Who analyse the performance of the company but does not make any transaction
Answer: (A) Who acts in a risky financial transaction, in the hope of substantial profit
Source: ICSI Guideline Answers (answer key), December 2020, Q. 45 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 46 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
An investor is holding 100 shares of PQR Ltd. The current rate of dividend paid by the company is ₹ 10 per share. The long-term growth rate is expected to be 10% and the expected rate of return is 20%. Current market price of the share is :
(A)₹ 110
(B)₹ 112
(C)₹ 120
(D)₹ 111
Answer: (A) ₹ 110
Source: ICSI Guideline Answers (answer key), December 2020, Q. 46 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 47 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
According to ...................... theory, it is futile to engage in Technical analysis.
(A)Dow Jones theory
(B)Random Walk theory
(C)Efficient Market theory
(D)None of the above
Answer: (B) Random Walk theory
Source: ICSI Guideline Answers (answer key), December 2020, Q. 47 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 49 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
.......................... focus more on past price movements of firm’s stock than on the underlying determinants of future profitability.
(A)Fundamental Analysts
(B)System Analysts
(C)Credit Analysts
(D)Technical Analysts
Answer: (D) Technical Analysts
Source: ICSI Guideline Answers (answer key), December 2020, Q. 49 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 50 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
If the markets are efficient, the security price provides :
(A)Inadequate return for taking up risk
(B)Normal return for the level of risk taken
(C)High return for the level of risk taken
(D)Both (B) and (C)
Answer: (B) Normal return for the level of risk taken
Source: ICSI Guideline Answers (answer key), December 2020, Q. 50 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 51 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Consider a graph with standard deviation on the horizontal axis and expected return on the vertical axis. The line that connects the risk-free rate and the optimal risky portfolio is called :
(A)The indifference curve
(B)The security market line
(C)The capital market line
(D)The characteristic line
Answer: (C) The capital market line
Source: ICSI Guideline Answers (answer key), December 2020, Q. 51 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 52 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
If the standard deviation of a portfolio return is 15% and risk tolerance level for the investor is 40. What will be the risk penalty for the investor ?
(A)4.5%
(B)2.67%
(C)6.32%
(D)5.625%
Answer: (D) 5.625%
Source: ICSI Guideline Answers (answer key), December 2020, Q. 52 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 55 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
When a portfolio comprises investment in three shares (Share A — 40%, Share B — 25% and Share C — 35%) whose beta factors are 1.3, 1.6 and 1.2, respectively, the portfolio beta is :
(A)1.34
(B)1.43
(C)1.24
(D)1.42
Answer: (A) 1.34
Source: ICSI Guideline Answers (answer key), December 2020, Q. 55 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 57 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The unsystematic risk is explained :
(A)By variance of the index
(B)By unexplained variance of the index
(C)By explained variance of the index
(D)Not affected by variance
Answer: (B) By unexplained variance of the index
Source: ICSI Guideline Answers (answer key), December 2020, Q. 57 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 58 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The standard deviation of market returns is15. The return of stock X is 25%. The riskless rate of interest is 5%. The risk premium of the X stock is :
(A)1.33
(B)5
(C)15
(D)20
Answer: (D) 20
Source: ICSI Guideline Answers (answer key), December 2020, Q. 58 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 59 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The Sharpe index assigns the high value to funds that have :
(A)Low standard deviations
(B)Higher returns
(C)Higher risk adjusted returns
(D)Higher risk premium
Answer: (C) Higher risk adjusted returns
Source: ICSI Guideline Answers (answer key), December 2020, Q. 59 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 88 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Following information provided by B Ltd. :
·
Last Earning Per Share (EPS) of the company = ₹ 75 per share
·
Company’s dividend pay-out ratio = 40%
·
Required rate of return from equity investment = 18%
By using capitalization earning method, the value of equity will be (if dividend are expected to grow at a constant rate of 10% per annum) :
(A)₹ 412.50
(B)₹ 183.33
(C)₹ 166.67
(D)₹ 375
Answer: (A) ₹ 412.50
Source: ICSI Guideline Answers (answer key), December 2019, Q. 88 (Corporate and Management Accounting paper, Syllabus 2017).
December 2019Q. 97 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
The relationship between risk and return established by the security market line is called :
(A)Earning Based Model
(B)Capital Assets Pricing Model
(C)Discounted Cash Flow Model
(D)Arbitrage Pricing Theory
Answer: (B) Capital Assets Pricing Model
Source: ICSI Guideline Answers (answer key), December 2019, Q. 97 (Corporate and Management Accounting paper, Syllabus 2017).
December 2019Q. 4 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is an example of systematic risk in stocks ?
(A)Company strike
(B)Industrial recession
(C)Unexpected entry of a new competitor in the market
(D)Bankruptcy of a major supplier
Answer: (B) Industrial recession
Source: ICSI Guideline Answers (answer key), December 2019, Q. 4 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 9 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The Security Market Line shows the relationship between :
(A)Expected rate of return and beta
(B)Expected rate of return and diversifiable risk
(C)Required rate of return and unsystematic risk
(D)Realized rate of return and beta
Answer: (A) Expected rate of return and beta
Source: ICSI Guideline Answers (answer key), December 2019, Q. 9 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 19 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
An investor purchases an 8% bond having a face value of ₹ 1,000 and maturity of 5 years for ₹ 900. A year later he sells it for ₹ 960 in the market. The holding period gain of the investor is :
(A)8.88%
(B)14.00%
(C)14.58%
(D)15.55%
Answer: (D) 15.55%
Source: ICSI Guideline Answers (answer key), December 2019, Q. 19 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 23 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following does not contribute to systematic risk ?
(A)Change in the interest rates.
(B)Change in the level of government spending.
(C)Emergence of a new competitor.
(D)Change in the industrial policy.
Answer: (C) Emergence of a new competitor.
Source: ICSI Guideline Answers (answer key), December 2019, Q. 23 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 54 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
As you increase the number of stocks in a portfolio, the systematic risk is likely to :
(A)remain constant
(B)increase at a decreasing rate
(C)decrease at a decreasing rate
(D)decrease at an increasing rate
Answer: (A) remain constant
Source: ICSI Guideline Answers (answer key), December 2019, Q. 54 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 58 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Mr. A is planning to buy a security and is in a dilemma regarding price to be paid. For this he is relying on the required rate of return on the security. Help him out to calculate the aforesaid rate (%), if you are informed that security’s standard deviation is 6%, correlation coefficient of the security with the market is 0.6, and market standard deviation is 5%. You may assume that return from riskfree security in the market is 8% and return on market portfolio is 12%.
(A)10.68%
(B)10.88%
(C)10.58%
(D)10.78%
Answer: (B) 10.88%
Source: ICSI Guideline Answers (answer key), December 2019, Q. 58 (Financial and Strategic Management paper, Syllabus 2017).
June 2019Q. 6(b) (CMA)5 marksCorporate and Management Accounting paper, Syllabus 2017
(b)Explain the components of the total risk of a security. Provide necessary examples for each component of risks.
Total risk of a security comprises two components:
(i)Systematic Risk or Non-Diversifiable Risk
Systematic risk is the risk which is caused by factors beyond the control of specific company, such as general factors in the market, GDP, inflation, interest rates, tax policy, government policy, etc. These factors affect all the companies and cause variability in their returns. Systematic risk cannot be reduced by holding an efficiently diversified portfolio. Therefore, systematic risk is that part of total risk which cannot be eliminated by diversification. However, the systematic risk may be managed by ensuring that the portfolio includes a variety asset classes, like fixed income, cash and real estate, each of which will react differently in the event of a major systemic change.
Systematic risk of a security is indicated by beta coefficient (ß). ß captures the sensitivity of a security’s return with respect to market return.
(ii)Unsystematic Risk or Diversifiable Risk
It is that part of total risk which is diversifiable. It is caused by factors which are within the control of a specific company, such as management, operational efficiency, labour conditions and financial leverage. The sources of unsystematic risk are business risk and financial risk. Securities which are less than perfectly and positively correlated can be combined together to diversify away unsystematic risk.
It can be observed that unsystematic risk can be reduced to zero in an efficiently diversified portfolio; hence the only relevant risk in such a portfolio is systematic risk.
As per CAPM there is a linear and positive relationship between expected return and systematic risk measured by ß. CAPM is used to estimate expected return from a security or portfolio. ß measures the sensitivity of a security’s returns to the return of market portfolio. Some securities are less sensitive while others are more. Hence ß of different securities and portfolios are also different. Moreover, unsystematic risk of a security can be diversified away, hence investor will not receive any return or risk premium for bearing unsystematic risk. The investor will receive risk premium only for the systematic risk identified by ß.
Source: ICSI Guideline Answers, June 2019, Q. 6(b) (Corporate and Management Accounting paper, Syllabus 2017).
June 2019Q. 2(b) (FSM)3 marksFinancial and Strategic Management paper, Syllabus 2017
(b)An investor is seeking an efficient portfolio with a correlation of 0.7 between the portfolio and the market and a standard deviation of 2.5%. The market standard deviation is 1.4% and the market rate of return is 16%, a rate that is double the return on risk-free securities. What is the required rate of return being sought by the investor ?
Calculation of beta co-efficient
Standard deviation ( ) = 2.5% s Correlation co-efficient (r )= 0.70 m Market Standard Deviation ( ) = 1.4% m Beta Coefficient = (r x ) ÷ = (0.70 x 2.5) ÷ 1.4 = 1.25
m
s
m
R = 16 %
R = 8 %
m
f
Required rate of return =
R + ß (R -R )
f
m f
=
8% +1.25 (16-8)
=
18 %
Source: ICSI Guideline Answers, June 2019, Q. 2(b) (Financial and Strategic Management paper, Syllabus 2017).
June 2019Q. 2(e) (FSM)3 marksFinancial and Strategic Management paper, Syllabus 2017
(e)From the following information, calculate the expected rate of return of a portfolio:
Risk-free rate of return
10%
Expected return on market portfolio
20%
Standard deviation of an asset
3%
Market standard deviation
2.8%
Correlation coefficient of portfolio with market 0.70
Calculation of beta co-efficient
Standard deviation ( ) = 3% s Correlation co-efficient (r )= 0.70 m Market Standard Deviation ( ) = 2.8% m Beta Coefficient = (r x ) ÷ = 0.70 x 3 ÷ 2.8 = 0.75
m
s
m
R = 20 %
R = 10 %
m
f
Expected rate of return =
R + ß (R -R )
f
m f
R =
Risk free rate of Return
f
ß =
Risk Factor
R =
Market Return
m
=
10% +0.75 (20-10)
=
17.5 %
Source: ICSI Guideline Answers, June 2019, Q. 2(e) (Financial and Strategic Management paper, Syllabus 2017).
June 2019Q. 2A(iii) (FSM)5 marksFinancial and Strategic Management paper, Syllabus 2017
(iii)ABC. Ltd. has a risk free asset yielding 0.02. During this period expected return of 0.09 and a standard deviation of 0.04 are based on past data of the market portfolio. The risk premium 0.07 is considered to be constant throughout the period. A security has a coefficient of correlation with market portfolio of 0.75 and standard deviation is 0.08. The expected standard deviation of market portfolio is now 0.04. On the basis of the given data, find out :
(i)Market’s risk return trade-off; and
(ii)Security beta.
(i)Market’s risk return trade-off = (R -R ) ÷ m f m
Where, R = Market Return m R = Risk free rate of Return f = Standard deviation of market m = (0.09-0.02) ÷ 0.04 = 1.75
(ii)Security Beta
ß = ( ÷ ) x r s m m where, ß = Beta factor of investment
= Standard deviation of investment in security =0.08 s = Market Portfolio standard deviation =0.04 m r = Co-efficient of correlation of security with market portfolio =0.75 m
ß = (0.08 ÷ 0.04) x 0.75 = 1.5
Source: ICSI Guideline Answers, June 2019, Q. 2A(iii) (Financial and Strategic Management paper, Syllabus 2017).
December 2018Q. 3(a) (FSM)5 marksFinancial and Strategic Management paper, Syllabus 2017
Differentiate between the following :
(a)‘Investment’ and ‘Speculation’
‘Investment’ and ‘Speculation’
Basis for comparison
Investment
Speculation
Meaning
The purchase of an asset with Speculation is an act of
the hope of getting returns is
conducting a risky
called investment.
financial transaction, in
the hope of substantial profit.
Basis for decision
Fundamental factors, i.e.
Hearsay, technical charts
making
performance of the company
and market psychology
Time horizon
Long term
Short term
Risk involved
Moderate risk
High risk
Behaviour of participants
Conservative and Cautious
Risk takers
Intent to profit
Changes in value
Changes in prices
Expected rate of return Modest rate of return
High rate of return
Funds
An investor uses his own
A speculator uses
funds
borrowed funds
Income
Stable
Uncertain and Erratic
Source: ICSI Guideline Answers, December 2018, Q. 3(a) (Financial and Strategic Management paper, Syllabus 2017).
December 2018Q. 3(b) (FSM)5 marksFinancial and Strategic Management paper, Syllabus 2017
Differentiate between the following :
(b)‘Markowitz model’ and ‘Sharpe index model’
Markowitz model and Sharpe Index Model
Markowitz model
Dr. Harry M. Markowitz is credited with developing the first modern portfolio analysis model, the Markowitz Model. It provides a theoretical framework for analysis of riskreturn choices. The concept of efficient portfolios has been enunciated in this model. A portfolio is efficient when it yields highest return for a particular level of risk or minimizes risk for a specified level of expected return.
The Markowitz model makes the following assumptions regarding investor behaviour:
— Investors consider each investment alternative as being represented by a probability distribution of expected returns over some holding period.
— Investors maximize one period expected utility and possess utility curve, which demonstrates diminishing marginal utility of wealth.
— Individuals estimate risk on the basis of variability of expected returns.
— Investors base decisions solely on expected return and variance of returns only.
— At a given risk level, higher returns are preferred to lower returns. Similarly for a given level of expected returns, investors prefer less risk to more risk.
Sharpe Index Model
Willam Sharpe introduced a model called Sharp Index Model in which return on a security is correlated to an index of securities or an index or an economic indicator like GDP or general price level. Sharpe developed the Single-Index Model and Multi index model. The single-index model imposes restrictions on how security returns can covary. In particular, it is assumed that all covariance arises through an "index." This leads to a reduction in complexity. Besides simplifying the covariance matrix, this approach is easily extended to take account of non-financial factors. In the multi-index model, for example, one of the indexes could easily be the rate of inflation.
Source: ICSI Guideline Answers, December 2018, Q. 3(b) (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 8 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Beta Ltd. faced with decision to purchase or acquire on lease a machine. Cost of the machine is ₹ 7,61,790/-. The asset can be financed by taking loan on which interest is payable @ 15% and loan will be paid in 5 equal installments inclusive of interest. Tax rate is 25%. Assume loan installment is payable at the beginning of the year. What will be the approx. loan installment amount for each year ?
(A)₹ 1,79,778
(B)₹ 1,94,370
(C)₹ 1,97,350
(D)₹ 2,18,178
Answer: (C) ₹ 1,97,350
Source: ICSI Guideline Answers (answer key), December 2024, Q. 8 (Financial and Strategic Management paper, Syllabus 2017).
June 2024Q. 52 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is not an assumption of Capital Asset Pricing Model (CAPM) ?
(A)Single-period transaction horizon
(B)Perfect capital market
(C)Investors cannot borrow and lend at the risk-free rate of return
(D)Perfect capital market
Answer: (C) Investors cannot borrow and lend at the risk-free rate of return
Source: ICSI Guideline Answers (answer key), June 2024, Q. 52 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 39 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The assumptions of Capital Asset Pricing Model include :
(A)Diversified portfolio and Single point transaction horizon
(B)Investors can borrow and lend at Risk-free rate of return
(C)Perfect Capital Market
(D)All of the above
Answer: (D) All of the above
Source: ICSI Guideline Answers (answer key), June 2022, Q. 39 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 53 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is not an assumption of CAPM?
(A)Diversified Portfolio
(B)Single-period transaction horizon
(C)Investor can borrow and lend at the risk-free rate of return
(D)Capital market is not perfect
Answer: (D) Capital market is not perfect
Source: ICSI Guideline Answers (answer key), December 2021, Q. 53 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 85 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
The (Beta) of a risk free stock is :
(A)10
(B)–1
(C)1
(D)0
Answer: (D) 0
Source: ICSI Guideline Answers (answer key), June 2021, Q. 85 (Corporate and Management Accounting paper, Syllabus 2017).
June 2021Q. 51 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The intercept of Security Market Line (SML) on the Y Axis is ...................
(A)Risk Free Return
(B)Risk Premium
(C)Market Return
(D)Beta ( β )
Answer: (D) Beta ( β )
Source: ICSI Guideline Answers (answer key), June 2021, Q. 51 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 56 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Anubhav is planning to purchase a share that has a beta coefficient of 0.95. He estimates the expected market return to be 12% while T-Bills yield 7%. What rate should he expect and require on the stock according to be SML (Security Market Line) ?
(A)11.33%
(B)12.67%
(C)12.33%
(D)11.75%
Answer: (D) 11.75%
Source: ICSI Guideline Answers (answer key), June 2021, Q. 56 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 25 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
ANT Corporation common stock has a beta, ( ), of 1.5. The risk-free rate is 8%, and the market return is 12%. Determine the cost of equity shares using the CAPM.
(A)14%
(B)11%
(C)12%
(D)13%
Answer: (B) 11%
Source: ICSI Guideline Answers (answer key), December 2020, Q. 25 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 53 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is the equation of the Security Market Line (SML) ?
(A)R + R (R – R ) i F m F
(B)R = R (R – R ) i F m F
(C)R = R + (cid:63) (R – R ) i F i F m
(D)R = R + (cid:63) (R – R ) i F i m F
Answer: (D) R = R + (cid:63) (R – R ) i F i m F
Source: ICSI Guideline Answers (answer key), December 2020, Q. 53 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 54 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Capital Asset Pricing Model (CAPM) Account for ..................... .
(A)Unsystematic risk
(B)Systematic risk
(C)Both (A) and (B)
(D)Not used for risk analysis
Answer: (B) Systematic risk
Source: ICSI Guideline Answers (answer key), December 2020, Q. 54 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 96 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
The risk free rate is 8%, return on a broad market index is 15%. The actual return provided by the security is 18%. What must be its beta, by using CAPM if the security is correctly priced in the market ?
(A)1.43
(B)0.70
(C)2.00
(D)1.2
Answer: (A) 1.43
Source: ICSI Guideline Answers (answer key), December 2019, Q. 96 (Corporate and Management Accounting paper, Syllabus 2017).
December 2019Q. 12 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
An equity share with beta greater than unity would be called :
(A)A defensive stock, because it is expected to decrease more than the market increase
(B)An aggressive stock, because it is expected to increase more than the market increase
(C)A defensive stock, because it is expected to increase more than the market decrease
(D)An aggressive stock, because it is expected to decrease more than the market increase
Answer: (B) An aggressive stock, because it is expected to increase more than the market increase
Source: ICSI Guideline Answers (answer key), December 2019, Q. 12 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 57 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Beta measures risk of an individual portfolio in relation to market portfolio. It is calculated as :
(A)Risk of Market Portfolio/Total Risk of Portfolio
(B)Total risk of portfolio/Risk of Market Portfolio
(C)Diversifiable risk of portfolio/Risk of Market Portfolio
(D)Non-diversifiable risk of portfolio/Risk of Market Portfolio
Answer: (D) Non-diversifiable risk of portfolio/Risk of Market Portfolio
Source: ICSI Guideline Answers (answer key), December 2024, Q. 57 (Financial and Strategic Management paper, Syllabus 2017).
June 2024Q. 51 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Portfolio approach to investing is primarily focused on :
(A)Diversification
(B)Value Protection
(C)Return Appreciation
(D)Risk Optimization
Answer: (A) Diversification
Source: ICSI Guideline Answers (answer key), June 2024, Q. 51 (Financial and Strategic Management paper, Syllabus 2017).
June 2023Q. 56 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
If a portfolio's expected refurn is 9 percent, var iance of return is 100 percent and the investor’s risk tolerance is 50, the risk penalty and utility respectively are :
(A)2 & 7
(B)2 & 8
(C)3 & 7
(D)3 & 8
Answer: (A) 2 & 7
Source: ICSI Guideline Answers (answer key), June 2023, Q. 56 (Financial and Strategic Management paper, Syllabus 2017).
June 2023Q. 59 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which one of the following is not true in relation to Sharpe Ratio ?
(A)Sharpe ratio is a risk-adjusted measure of return that is often used to evaluate the perfornance of a portfolio
(B)The ratio helps to make the performance of one portfolio comparable to that of another portfolio by making an adjustment for risk
(C)The idea of the ratio is to see how much additional returns are receiving for the additional volatility of holding the risky asset over a risk-free asset
(D)Lower the Sharpe ratio, better is the situation
Answer: (D) Lower the Sharpe ratio, better is the situation
Source: ICSI Guideline Answers (answer key), June 2023, Q. 59 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 60 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is not an objective of portfolio management ?
(A)Risk Reduction
(B)Safety of Principal
(C)Diversification of Risk
(D)Stability of Income
Answer: (C) Diversification of Risk
Source: ICSI Guideline Answers (answer key), June 2022, Q. 60 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 54 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The main aim of portfolio is to reduce .......... by diversification.
(A)Risk
(B)Profit
(C)Cash flow
(D)Borrowing Fund
Answer: (A) Risk
Source: ICSI Guideline Answers (answer key), June 2021, Q. 54 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 55 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Suppose two portfolios have the same average return, the same standard deviation of returns, but portfolio A has a higher beta than portfolio B. According to the Sharpe measure, the performance of portfolio A.
(A)Is the same as the performance of portfolio B
(B)Is better than the performance of portfolio B
(C)Is poorer than the performance of portfolio B
(D)Cannot be measured
Answer: (A) Is the same as the performance of portfolio B
Source: ICSI Guideline Answers (answer key), June 2021, Q. 55 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 56 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
If the risk free rate of interest is 11% and expected return on market portfolio is 18%, ascertain expected return of the portfolio if (cid:63) of portfolio is 0.90.
(A)17.1%
(B)17.2%
(C)17.3%
(D)18.1%
Answer: (C) 17.3%
Source: ICSI Guideline Answers (answer key), December 2020, Q. 56 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 17 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Diversification can eliminate risk, if the securities of a portfolio are :
(A)perfectly positively correlated
(B)perfectly negatively correlated
(C)weakly positively correlated
(D)weakly negatively correlated
Answer: (B) perfectly negatively correlated
Source: ICSI Guideline Answers (answer key), December 2019, Q. 17 (Financial and Strategic Management paper, Syllabus 2017).
December 2025Q. 6A(iii)5 marksSyllabus 2022
(iii)Discuss the concept of Relative Strength Index.
Relative Strength Index: It is a momentum indicator used in technical analysis. RSI measures the speed and magnitude of a security’s recent price changes to evaluate overvalued or undervalued conditions in the price of the security. RSI is displayed as an oscillator (a line graph) on a scale of 0 to 100. It was developed by J. Welles Wilder Junior and was introduced in the seminal 1978 book titled New Concepts in Technical Trading System.
RSI can do more than just pointing to over bought and over sold securities. It can also indicate securities that may be primed for a trend reversal or corrective pull back price. It can even signal when to buy and when to sell. Traditionally, an RSI reading of 70 and above indicates an overbought situation. A reading of 30 or below indicates an oversold situation. RSI, used in conjunction with other technical indicators, can help traders make better-informed trading decisions.
RSI uses a two-part calculation, which are as follows:
RSI =100 - 1+Relative Strength
Average Gain Per Day
Relative Strength = Average Loss Per Day
Source: ICSI Guideline Answers, December 2025, Q. 6A(iii) (Syllabus 2022).
June 2025Q. 6(d)5 marksSyllabus 2022
(d)Sun Star Ltd. is a listed company whose share prices for last 14 trading session are given below. Calculate Relative Strength Index :
Trading session number
Share price (₹)
1
334
2
344
3
335
4
312
5
334
6
348
Trading session number
Share price (₹)
7
314
8
309
9
316
10
339
11
347
12
317
13
333
14
340
Step 1: Calculation of Average Gain and Average Loss
Trading session number
Share price (₹)
Gain in ₹
Loss in ₹
1
334
-
-
2
344
10
3
335
9
4
312
23
5
334
22
6
348
14
7
314
34
8
309
5
9
316
7
10
339
23
11
347
8
12
317
30
13
333
16
14
340
7
Total
107
101
Number of sessions
8
5
Average Gain/Loss
13.375
20.2
Step 2: Calculation of Relative Strength
Average Gain Per Day
13.375
RS =
=
= 0.66
Average Loss Per Day
20.2
Step 3: Calculation of Relative Strength Index
RSI =
100 -
= 39.76 or 40 Approx.
(1+RS)
Source: ICSI Guideline Answers, June 2025, Q. 6(d) (Syllabus 2022).
December 2024Q. 18 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
The affairs of the ICAl are managed by .................. in accordance with the provision of the Chartered Accountants Act, 1949 and the Chartered Accountants Regulation 1988.
(A)Finance Minister
(B)State Government
(C)Central Government
(D)A Council
Answer: (D) A Council
Source: ICSI Guideline Answers (answer key), December 2024, Q. 18 (Corporate and Management Accounting paper, Syllabus 2017).
June 2024Q. 48 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
.............. charts have a thin vertical line showing the price range for a given period that is shaded different colors based on whether the stock ended higher or lower.
(A)Candlestick Charts
(B)Point and Figure Charts
(C)Bar Chart
(D)Line Chart
Answer: (A) Candlestick Charts
Source: ICSI Guideline Answers (answer key), June 2024, Q. 48 (Financial and Strategic Management paper, Syllabus 2017).
June 2024Q. 6(d)5 marksSyllabus 2022
(d)Share price of P Limited was trading at the following prices at NSE on various trading sessions :
Trading Session
Share Price of P Limited (₹)
1
4344
2
4254
3
4211
4
4308
5
4487
6
4213
7
4240
8
4112
9
4061
10
4414
11
4030
12
4336
13
4230
14
4392
Calculate RSI from the above data. Comment if share is overbought.
An RSI reading of 70 or above indicates an overbought situation whereas a reading of 30 or below indicates an oversold condition. Hence, the share is not overbought as RSI is below 70.
Source: ICSI Guideline Answers, June 2024, Q. 6(d) (Syllabus 2022).
June 2024Q. 6A(iii)5 marksSyllabus 2022
(iii)What is Price Rate of Change and Advance-Decline Ratio ?
Price Rate of Change
The Price Rate of Change (ROC) is a momentum-based technical indicator that measures the percentage change in price between the current price and the price a certain number of periods ago. The ROC indicator is plotted against zero, with the indicator moving upwards into positive territory if price changes are to the upside, and moving into negative territory if price changes are to the downside.
A rising ROC above zero indicates an uptrend in security prices whereas a falling ROC below zero indicates a downtrend in security prices.
The ROC will hover near zero indicating a consolidation is security price.
Closing Price p–Closing Price p-n
ROC = X 1000 Closing Price p-n Where
Closing Price - Closing price of the most recent period p Closing Price - Closing price n periods before most recent period p-n
Advance-Decline Ratio
The Ratio of number of stocks that increase to the number of stocks that have declined. If the ratio is more than one, trend is assumed to be bullish. If the ratio starts declining a change in trend is signaled.
Source: ICSI Guideline Answers, June 2024, Q. 6A(iii) (Syllabus 2022).
December 2023Q. 51 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Which of the following institute, through a joint venture with the Chartered Institute of Management Accountants, has established the Chartered Global Management Accountant designation ?
(A)Chartered Professional Accountants Canada
(B)Chartered Accountants Australia and New Zealand
(C)American Institute of Certified Public Accountants
(D)Australian Accounting Standards Board
Answer: (C) American Institute of Certified Public Accountants
Source: ICSI Guideline Answers (answer key), December 2023, Q. 51 (Corporate and Management Accounting paper, Syllabus 2017).
December 2023Q. 6A(i)5 marksSyllabus 2022
(i)What do you mean by Aroon Indicator ? Explain.
Aroon Indicator:
The Aroon indicator is a technical indicator that is used to identify trend changes in the price of an asset, as well as the strength of that trend. In essence, the indicator measures the time between highs and the time between lows over a time period. The idea is that strong uptrends will regularly see new highs, and strong downtrends will regularly see new lows. The indicator signals when this is happening, and when it isn't.
The indicator consists of the "Aroon up" line, which measures the strength of the uptrend, and the "Aroon down" line, which measures the strength of the downtrend. The Aroon indicator was developed by Tushar Chande in 1995.
Formulas of the Aroon Indicator:
Aroon up = 25-Period Since 25 period High / 25 * 100
Aroon down =25-Period Since 25 period low / 25 * 10
Source: ICSI Guideline Answers, December 2023, Q. 6A(i) (Syllabus 2022).
June 2023Q. 53 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
According to Dow Jones theory, share prices demonstrate a pattern over 4 to 5 years. These patterns can be :
(A)Preliminary, primary and secondary trends
(B)Preliminary, bullish and bearish trends
(C)Primary, secondary and minor trends
(D)Primary, secondary and major trends
Answer: (C) Primary, secondary and minor trends
Source: ICSI Guideline Answers (answer key), June 2023, Q. 53 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 33 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following statements is correct ?
(A)A Line chart is a basic type of chart used in financial analysis. It is generally created by connecting a series of past prices together with a line
(B)Line chart represents only the closing prices over a set period
(C)The line is formed by connecting the closing prices for each period over the time frame and intra-period highs and lows are ignored
(D)All of the above
Answer: (D) All of the above
Source: ICSI Guideline Answers (answer key), June 2022, Q. 33 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 43 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
According to Dow Jones theory, share prices demonstrate a pattern over :
(A)one to two years
(B)two to three years
(C)three to four years
(D)four to five years
Answer: (D) four to five years
Source: ICSI Guideline Answers (answer key), December 2021, Q. 43 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 45 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Double bottom formation chart represents :
(A)a bullish development
(B)a bearish development
(C)a pattern of uncertainty
(D)None of the above
Answer: (A) a bullish development
Source: ICSI Guideline Answers (answer key), December 2021, Q. 45 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 46 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following are two major tools of technical analysis ?
(A)Line chart, Bar chart
(B)Triangular task, Range taks
(C)Candlestick chart, Point and figure chart
(D)Charts, Indicators
Answer: (D) Charts, Indicators
Source: ICSI Guideline Answers (answer key), December 2021, Q. 46 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 59 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Bar chart is used to illustrate :
(A)High, low and closing stock price on a daily basis
(B)Reversal in the direction of stock prices without consideration of time
(C)High, low, opening and closing price on a daily basis
(D)The candlestick line
Answer: (A) High, low and closing stock price on a daily basis
Source: ICSI Guideline Answers (answer key), June 2021, Q. 59 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 52 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
The Institute of Chartered Accountants in Australia and the New Zealand Institute of Chartered Accountants amalgamated to become one body :
(A)CA ANZ
(B)ICA ANZ
(C)ANZ CA
(D)ANZ ICA
Answer: (A) CA ANZ
Source: ICSI Guideline Answers (answer key), December 2020, Q. 52 (Corporate and Management Accounting paper, Syllabus 2017).
December 2019Q. 47 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
The Accounting Standards Board was constituted by the Institute of Chartered Accountants of India in the year :
(A)1975
(B)1977
(C)1976
(D)1978
Answer: (B) 1977
Source: ICSI Guideline Answers (answer key), December 2019, Q. 47 (Corporate and Management Accounting paper, Syllabus 2017).
December 2019Q. 51 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Which of the following institute formerly was established as a registered company under the Companies Act ?
(A)The Institute of Chartered Accountants of India ( ICAI)
(B)The Institute of Company Secretaries of India (ICSI)
(C)The Institute of Cost and Works Accountants of India (ICWAI) {now it, The Institute of Cost Accountants of India}
(D)None of the above
Answer: (C) The Institute of Cost and Works Accountants of India (ICWAI) {now it, The Institute of Cost Accountants of India}
Source: ICSI Guideline Answers (answer key), December 2019, Q. 51 (Corporate and Management Accounting paper, Syllabus 2017).
December 2019Q. 53 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
‘‘The Association of International Certified Professional Accountants’’ launched by the :
(A)American Association of Public Accountants (AAPA)
(B)American Association of Chartered Public Accountants (AICPA)
(C)Chartered Institute of Management Accountants (CIMA)
(D)Both AICPA and CIMA
Answer: (D) Both AICPA and CIMA
Source: ICSI Guideline Answers (answer key), December 2019, Q. 53 (Corporate and Management Accounting paper, Syllabus 2017).
June 2021Q. 86 (CMA)1 markMCQCorporate and Management Accounting paper, Syllabus 2017
Which of the following investment decision is required to be taken for a stock, if its intrinsic value is greater than its market value ?
(A)Sell
(B)Hold
(C)Buy
(D)Indifferent
Answer: (C) Buy
Source: ICSI Guideline Answers (answer key), June 2021, Q. 86 (Corporate and Management Accounting paper, Syllabus 2017).
December 2019Q. 40 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following investment decisions is required to be taken for a stock, if its intrinsic value is greater than its market value ?
(A)Sell
(B)Hold
(C)Buy
(D)Indifferent
Answer: (C) Buy
Source: ICSI Guideline Answers (answer key), December 2019, Q. 40 (Financial and Strategic Management paper, Syllabus 2017).
December 2023Q. 7 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
According to ..................., the movements of the market are divided into three classifications, the primary movement, the secondary movement, and the daily/minor fluctuations.
(A)The Dow Theory
(B)The Elliot Wave Theory
(C)Random Walk Theory
(D)Efficient Market Hypothesis
Answer: (A) The Dow Theory
Source: ICSI Guideline Answers (answer key), December 2023, Q. 7 (Financial and Strategic Management paper, Syllabus 2017).
June 2023Q. 54 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Random walk theory does not imply that ..................... price changes are random.
(A)Day to day
(B)Week to week
(C)Year to year
(D)None of the above
Answer: (C) Year to year
Source: ICSI Guideline Answers (answer key), June 2023, Q. 54 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 58 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is not a major requirement of Efficient Market Hypothesis?
(A)Prices must be efficient so that new inventions and better products will cause a firm’s security prices to rise and motivate investors to buy stocks
(B)Transaction costs such as brokerage on purchase and sell of securities is taken into consideration
(C)Taxes are assumed to have no noticeable effect on investment policy
(D)Every investor has similar access to investible funds at same terms and conditions
Answer: (B) Transaction costs such as brokerage on purchase and sell of securities is taken into consideration
Source: ICSI Guideline Answers (answer key), June 2022, Q. 58 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 48 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following statement defines the efficient market ?
(A)Information is fully reflected on the stock prices
(B)The stock exchange is fully automated
(C)The market is monitored by the regulation authorities
(D)Free entry and exit of the investors
Answer: (A) Information is fully reflected on the stock prices
Source: ICSI Guideline Answers (answer key), December 2020, Q. 48 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 52 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
In ..............., the future earning capacity is predicted with the help of accounting ratios.
(A)Technical Analysis
(B)Industry Analysis
(C)Economic Analysis
(D)Company Analysis
Answer: (D) Company Analysis
Source: ICSI Guideline Answers (answer key), June 2021, Q. 52 (Financial and Strategic Management paper, Syllabus 2017).
December 2023, Q. 6A(ii) · Explain Hamada Equation and also calculate Hamada coefficient using following information. (Ch. 15)
December 2023, Q. 19 (CMA) · Beta Ltd. granted 5000 options to employees and directors under Employee Stock Option Scheme on 1st April, 2023 @ ₹ 170 when the market pric… (Ch. 6)
June 2023, Q. 16 (FSM) · Company A has an offer to invest in three projects – B, C and D. (Ch. 13)
December 2021, Q. 40 (FSM) · A company has Raw material holding period- 27 days; Conversion period-25 days; Finished goods holding period-28 days; Period of accounts rec… (Ch. 17)