NISM XB CHAPTER 1

Which of the following are ways of issuance of capitalin Primary Market?

Securities are issued to the members of the public, and anyone eligible to invest can participate in the issue, what type of issue is this?

Securities are issued to a select set of investors who can bid and purchase the securities on offer, what type of securities issue is this?

Private Placement of securities by a listed company is called a—–

Private Placement of securities by a listed company to a set of institutional investors termed as —

Securities are issued to existing investors as on a specific cut-off date, enabling them to buy more securities at a specific price —–

Securities are issued to existing investors as on a specific cut-off date, get an allotment of additional shares without any consideration.

The Primary Markets are regulated by_______

The first public offer of shares made by a company is called an —–

An IPO can be a :

Existing shareholders such as promoters or financial institutions offer a part of their holding to the public investors is called _____.

Who decide the price at which the shares will be allotted toinvestors in a public issue?

The company making a public issue of shares has to file withSEBI a document giving all information of the issuer and the proposed issue such as the operations and finances of the company. This document is called—–

If the final issue price is notknown at the time offiling then an indicative price band for the offer is provided in the prospectus. This document is called —— as it does not have final price.

ASBA means:

—- is an application for subscription toan issue containing anauthorization to the investors’ bank to block the application money in the bank account and release funds only on allotment.

—- means the bids made at the cut-off price and higher were for a higher number of shares than what was offered, subscriptions are lower than the offered number of shares, it is——

According to Section 67(3) of the Companies Act of 2013, an offer to subscribe to securities is made to less than — persons is called private placement of securities.

Qualified Institutional Buyers (QIBs) include:

______is an issuance of fresh shares by a company or an offer for sale by a promoter or promoter group to QIBs to meet the minimum share holding requirement specified by stock exchanges in their listing requirements.

_____is where securities once issued are bought and sold between investors.

Which of the following are participants of Secondary Market?

______provides a platform for investors tobuy and sell securities from each other in an organized and regulated manner.

If investors buy and sell shares among themselves, such trades are called___.

—– in an IPO is a short-term investing practice of using borrowed funds to invest with the expectation of making immediate short-term gains from the shares being listed at a premium to the issue price.

The order can be a ‘______’ wherethe investor specifies the maximum price at which they are willing to buy or the minimum price at which they are willing to sell.

—— is an instruction to buy or sell atthe best price currently available in the market.

—— is given to limit the loss in a buyor sell trade by specifying a price to execute an opposite trade.

_____is the system electronically matchesbuy and sell orders so that buy orders are executed at the price specified or lower and sell orders at the price specified or higher.

Secondary Market transactions have distinct phases which are:

—- is the process of identifying what is owed to the buyer and seller in a trading transaction.

—- is the mechanism of settling the obligations of counter parties in a trade.

Settlement System in India:

_____completes the settlement by paying funds sellers and delivering securities to buyers.

Securities are held in dematerialised form in:

—– are institutional intermediaries, who are authorised to hold funds and securities on behalf of large institutional investors such as banks, insurance companies, mutual funds, and foreign institutional investors.

Secondary markets are regulated under the provisions of:

Buyers of equity shares are expected to give funds for their purchase and sellers are expected to deliver the shares they have sold. This is the—-

When the buyer receives the securities andthe seller receives the funds for shares sold. This is the _____

The clearing corporation acts as the counter party for all trades and settles them without default. To provide such a guarantee, the clearing corporation collects margins from members. These margins comprise of —– (for capital adequacy) and ——- that vary based on the marked-to-market open position of a member.

—– refers to the settlement mechanism where the trades done on a particular day are settled to a pre-defined cycle.

On Settlement Day, if there are any shortages in securities delivered by a member, the member is debited for these securities at valuation price. This is called—

Physical delivery of securities given (as against dematerialized delivery) may result in a defective delivery of securities, which are called—

____ is a facility provided by members of stock exchanges, It allows investors to take a larger position than what their own resources would allow, thus increasing their profits if their expectation of price movements came true.

____is a basket of equity shares whose price is weighted by market capitalization, and tracked for changes in price level of the stocks included in it.

These are indices made up of a few large listed shares, but serve as a quick barometer of market movement. They are often used as performance benchmarks. It is called____

_____are indices created to track various industry sectors such as technology, banking, metals, finance, real estate, consumer durables, media and the like.

—– indicates how much of activity took place on a business day in the market as a whole and in each stock.

If there is an abnormal price movement in an index, defined in percentage terms, the exchange can suspend trading. This is called hitting the____.

Price Earning Ratio=

Trailing P/E=

Forward P/E=

—- tells us how much investor is willing to pay per rupee of earnings.

To determine whether a particular P/E is high or low what are factors to be considered:

Peg Ratio=

—- helps investors determine the degree of reliability of that growth assumption.

If the PEG ratio is _____, it means that the market is valuing a stock in accordance with the stock’s estimated EPS growth.

Price to Book Value Ratio=

Dividend Yield=

Stocks with ____ dividend yield appeal to investors who are income seeking and are adverse to risky investments

Stocks with low PE multiples are seen as —–

Stocks whose market price is lower than book value are considered—–

A ______is when buyers are willing to pay higher and higher prices, as the overall optimism for better future performance of stocks is high.

—- in equity reflect this pessimism, stocks prices fall. Sellers quit in despair, accepting a lower price and a loss on their stocks.

—– is about understanding the quantitative and qualitative factors that impact earnings of a company and make an estimate of future earnings based on this analysis.

If the factors to consider are economic (E), industry (I) and company (C) factors, beginning at company-specific factors and moving up to the macro factors that impact the performance of the company is called ____ approach.

If the factors to consider are economic (E), industry (I) and company (C) factors, Scanning the macro economic scenario and then identifying industries to choose from and zeroing in on companies, is the_____

Which of the following are Economic Factors?

Which of the following are Industry Factors?

Which of the following is a Company Factor?

_____ is involves studying the price and volume patterns to understand how buyers and sellers are valuing a stock and acting on such valuation.

In technical Analysis which of the following is considered:

_____can either be a discretionary, where the Portfolio Manager manages the portfolio in alignment with the investor’s requirement or a Non-Discretionary where the portfolio manager will provide advice and information to the investor who will themselves take the decisions on investment choices and timing of the investment.

Which of the following are options for Equity Investment?

_____debt markets enable lending and borrowing fund sup to atenor of one year.

Which of the following are Money Market Instruments?

—- is a short term instrument used to lend or borrow for periods ranging from overnight to one year against the collateral of eligible debt securities (mostly G-Secs and T-bills).

Treasury Bills are issued by —-

Which is least likely to be tenure of a treasury bond

Treasury Bills are issued at ——and redeemed at —–

Treasury Bills are issued in multiple of —

—– is a negotiable money market instrument and issued in dematerialised form against funds deposited at bank or other eligible financial institution for specific time period.

Certificate of deposit is issued in denomination of —

Commercial Paper is issued for minimum —– and maximum —- tenor.

Commercial Paper is issued in denomination of —

—– are a category of government securities issued by the RBI which provides inflation protected returns to the investors.

Corporate Bonds are issued by:

Corporate bonds are issued at aspread tothe G-secyield.The difference between the two yields is called_______.

The rate, at which the cash flows of a bond are discounted, is called—

If we discount the cash flows by a higher yield, the value of the bond will ____. If we discount by a lower yield, the value will _____.

Which of the following impact the value of bond?

The valuation of a bond for its residual tenor, using a market rate or yield to discount the cash flows, is also called as____.

The rate that equates the present value of the future cash flows of abond to its current value is called______.

1 The curve that links the yields of traded bonds at apoint of time is the_____

____thus measures the price sensitivity of a bond.

The duration of a coupon paying bond will always be —- than its term to maturity and the duration of a zero coupon bond is —– to its term to maturity.

Risk involved in investing in debt securities:

Derivatives are typically used for______

Buy a Call gives the buyer:

Sell a Call gives the writer:

Buy a Put gives the buyer:

Sell a Put gives the buyer:

Buy a Call profit is — and loss is —-

Buy a Put profit is — and loss is —-

Sell a Call profit is — and loss is —-

Sell a put profit is — and loss is —-

Pay off call —- and put —-

In the money means—

Out of money means—

At the money means____

Time Value of an option:

A —— enables a buyer or a seller to buy or sell a stock, commodity or interest rate, for delivery on a future date.

Future Price=

The difference between the spot and the futures price thus adjusts to the market rates of interest, for the period between spot and futures delivery. This interest is called as___

The carry cost of buying spot and selling futures on settlement date is—

On settlement date, both the spot and the futures are at the same level. This is known as the—–

If the exercise date of the option is pre-determined and set as the date on which the option will expire, such an option is called a—-

If the option can be exercised at any point of time before the expiry date, such an option is called an—

The seller of the option is also called the:

Options have a fixed expiry date, after which they are worthless. Therefore an option must lose value over time as it nears the expiry date. This is called—-

Time decay works to the disadvantage of option —–and to the advantage of option —–.

When an investor has an open position in the underlying, he can use the derivative markets to protect that position from the risks of future price movements, this is called

Which of the following are Derivative Market Indicator?

______shows the volume of open positions that have not been squared up.

______is computed by dividing the number of puts (contracts) by the number of calls (contracts).

_____ is the process of carrying over a futures position from one contract period to the next.

_________ is the market to determinethe price of different currencies in terms of one another in order to enable trade between countries and to provide a way to transfer currency associated risks arising from economic transactions.

______ market help to hedge therisk of price movement for companies dependent on import as well as export.

The currency quoted first in the currency pair is called ——– and currency quoted next is called ——-.

The date of settlement of a spot transaction is called —- date and —–the date on which the terms of the transaction, such as currency, price, amount and value date are agreed upon by the parties to the transaction.

If the settlement is done on the trade date itself, the derived rate is called the —– rate. If it is settled the next day after trade date, the rate is called —- rate.

The OTC markets for derivatives deal in:

_____ is an instrument used to hedge risk arising out of the exposure to a currency by the exchange of liability in one currency for a liability in another currency.

—– is a standardized forward contract, traded on an exchange, to buy or sell a certain underlying asset or an instrument at a certain date in the future, at a specified price.

The option premium is a function of (i) spot price (ii) strike price (iii) volatility in the currency pair (iv)time to maturity (v) the risk free interest rate on the base currency quoting currency.

An increase in the spot price ——- the premium for a call option and —— the premium for a put option.

An increase in the strike pricereduces the premium for_____option and increases it for a ______option

An —— in the interest rate differential betweenthe two currencies increases the premium for the call option but decreases it for a put option.

Which of the following factors impact exchange rates?

The proportion of a public issueof shares allocated to various categories of investors is decided by____

In a leveraged investment in an IPO, the profits to the investor depends upon

A high turnover in a stock is an indicator of which of the following:

A decrease in interest rates is likely to see a greater impacton the price of which bond?

Read the following case let and answer the questions that follow: Mr. A is a conservative investor who is looking to invest in equity markets. He is evaluating shares of VKP Ltd. with a PE ratio of 22, PEG ratio of 0.98, dividend yield of 3.5.Which of the following may make VKP Ltd unsuitable for Mr. A as a conservative investor?

The PEG ratio of the company classifies it as:

Mr. A is attracted by the high dividend yield of the stock. Whichof the following is a likely feature of the investment going forward?

The trading members of stock exchanges are also called stock brokers:

In electronic trading a price-time priority is followed in executing orders.

Margin trading amplifies the loss to the investor in the event of adverse price movements.

Higher the turnover in a stock, lower is the liquidity.

Stock Exchanges also impose price bands on individual securities to limit volatility in prices.

If the PEG ratio is less than 1, it means that EPS growth is potentially able to surpass the market’s current valuation and the stock’s price is undervalued.

If PEG ratios is more than 1 can indicate – that the stock is currently overvalued.

The dividend yield of a share is directly related to its share price.

Dated Government Securities, commonly known as G-Secs, refer to securities with maturities from 1 to 30 years.

Secondary markets for corporate bonds are quite illiquid as compared to government securities

The value of the bond and its discounting rate (Yield) are directly related.

Higher the duration of a bond, higher its price sensitivity.

There are fixed or guaranteed returns from debt funds.

Carry Cost is a market driven rate.

Higher OI connotes higher liquidity and lower transaction cost.

A High Rollover percentage is taken as an indicator of the weakness in the market sentiment.