NPTEL Online Certification Courses
Indian Institute of Technology Kharagpur
Behavioral and Personal Finance
Assignment- 6 (Week 6)
TYPE OF QUESTION: MCQ
Number of questions: 10 Total Marks: (10 X 2) = 20
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QUESTION 1: (Marks 2)
Which of the following is correct?
1. There is a direct relationship between bond yield and price
2. Fixed income securities are wholly risk-free
3. Balanced funds have low income potential
Choose the correct combination:
a. 2 only
b. 1 and 3 only
c. 2 and 3 only
d. None of these
Correct Answer: d
Detailed Solution: There is an inverse relationship between bond yield and price. Fixed income
securities are not wholly risk-free; they carry credit risk, interest rate risk, etc. Balanced funds
have moderate to high income potential.
NPTEL Online Certification Courses
Indian Institute of Technology Kharagpur
QUESTION 2: (Marks 2)
Suppose the required interest rate and coupon rate of a bond is 5%. This implies-
a. Bond Price > Nominal Value of Bond
b. Bond Price < Nominal Value of Bond
c. Bond Price = Nominal Value of Bond
d. None of these
Correct Answer: c
Detailed Solution: Bond price equals the nominal value of bond if required interest rate is equal
to the coupon rate.
QUESTION 3: (Marks 2)
An 6% bond with nominal value of ₹ 5,000, is sold in the market at ₹ 4,500. Calculate the yield
rate.
a. 6.67%
b. 6 %
c. 5.4 %
d. 5%
Correct Answer: a
Detailed Solution: Yield (%) = (C / MV) *100 = (₹ 5000 * 6% / ₹ 4500) * 100 = 6.67%
NPTEL Online Certification Courses
Indian Institute of Technology Kharagpur
QUESTION 4: (Marks 2)
Read the following table carefully and find the suitable match-
A. Taxable Bond Fund 1. Moderate to high growth potential
B. Growth and Income Fund 2. Very high stability
C. Taxable Money market fund 3. Moderate to High Income Potential
a. A-3, B-1, C-2
b. A-3, B-2, C-1
c. A-1, B-3, C-2
d. A-1, B-2, C-3
Correct Answer: a
Detailed Solution:
Correct Table
A. Taxable Bond Fund Moderate to High Income Potential
B. Growth and Income Fund Moderate to high growth potential
C. Taxable Money market fund Very high stability
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QUESTION 5: (Marks 2)
Blend funds majorly invest in-
a. Value stocks only
b. Growth stocks only
c. Both ’a’ and ‘b’
d. None of the these
Correct Answer: c
Detailed Solution: Blend funds invest in both value stocks and growth stocks.
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NPTEL Online Certification Courses
Indian Institute of Technology Kharagpur
QUESTION 6: (Marks 2)
If a company has issued x% n-year bond which is to be redeemed at nominal value. The bond price
can be computed as -
a. [(Interest* present value interest factor of nth year at x%) + (Redemption value*
present value annuity factor of n years at x%)]
b. [(Interest* present value annuity factor of n years at x%) + (Redemption value*
present value interest factor of nth year at x%)]
c. [(Interest* present value interest factor of xth year at n%) + (Redemption value*
present value annuity factor of x years at n%)]
d. [(Interest* present value annuity factor of x years at n%) + (Redemption value*
present value interest factor of xth year at n%)]
Correct Answer: b
Detailed Solution: Bond price = [(Interest* present value annuity factor of n years at x%) +
(Redemption value* present value interest factor of nth year at x%)]
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QUESTION 7: (Marks 2)
Assume that the return and beta of the portfolio are 6% and 1 respectively. The T-bill rate is 2%.
Compute Treynor Index of the portfolio.
a. 4%
b. 0.4
c. 4
d. None of these
Correct Answer: c
Detailed Solution:
Treynor Index of the portfolio: [(portfolio return minus risk free rate)/ beta]
Therefore, Treynor Index of the portfolio= [(6% - 2%)/ 1] = 4
NPTEL Online Certification Courses
Indian Institute of Technology Kharagpur
QUESTION 8: (Marks 2)
Tiah is contemplating to invest in fixed income securities. What are the factors which could
convince her make this investment?
1. High risk
2. Guaranteed income
3. Diversification
Choose the correct combination:
a. 1 and 3 only
b. 1 and 2 only
c. 2 and 3 only
d. None of these
Correct Answer: c
Detailed Solution: Fixed Income Securities offer lower risks, guaranteed income and entail
diversification when combined with other risky assets.
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QUESTION 9: (Marks 2)
Suppose on 30th August, 2022, ‘ABC Fund- Regular plan (G)’ MF had NAV of ₹ 40, with assets,
the market value of which was ₹ 8,000 cr. and total no. of units (in crore) outstanding on that date
were 180 cr. Calculate approximately the liabilities of the fund (in cr.).
a. ₹ 36,000
b. ₹ 1,400
c. ₹ 15,200
d. ₹ 800
Correct Answer: d
Detailed Solution:
NAV= [(Market value of Assets - Market value of Liabilities) / No. of units]
Liabilities = [Market value of Assets - (NAV* Number of units)] = [₹8,000 cr. - (₹ 40* 180 cr.)]
= 800 Cr.
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NPTEL Online Certification Courses
Indian Institute of Technology Kharagpur
QUESTION 10: (Marks 2)
Which of the following statements is correct?
a. Minimizing return is one of the investment objectives
b. Mutual funds facilitate direct exposure to market
c. Tracking Error indicates Standard deviation of the differential return between
portfolio and benchmark
d. Institutional Investors have lower risk affordability
Correct Answer: c
Detailed Solution:
Tracking Error indicates Standard deviation of the differential return between portfolio and
benchmark. Mutual funds facilitate indirect exposure to market. Maximizing return is one of the
investment objectives. Institutional Investors have higher risk affordability.
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