NISM 15 Research Analyst Mock Test 18: 600 MCQ Series (Full Detailed Version)
NISM Series XV: Mock Test 18
Dhaval’s Personal Advice for Aspirants:
Practice and understand these 25 questions. If you can't understand the theory or the logic, just mug it up (memorize it) because these are very important and sure-shot questions that will appear in the exam!
Q 26. What is the method to calculate 'Value of Equity'?
Options:
- Free cash flows for equity (FCFE) is discounted using the cost of equity
- Free cash flows to the firm (FCFF) is discounted using the cost of debt
- Free cash flows for equity (FCFE) is discounted using the cost of debt
- Free cash flows to the firm (FCFF) is discounted using the cost of equity
View Correct Answer & Detailed Explanation
Explanation: To calculate the value of equity, FCFE is discounted using the cost of equity. In contrast, FCFF is used to calculate Enterprise Value by discounting with WACC.
Q 27. Which is the authentic source to check facts on a company by a research analyst?
Options:
- Business Websites | - Annual Reports | - Research reports and opinions | - Media reports
View Correct Answer & Detailed Explanation
Explanation: Annual Reports are an authentic source to verify the facts of a company as they are published by the company itself and the accounts etc. are certified by Chartered Accountants and audited for regulatory compliance.
Q 28. State whether true or false? - If imports are more than exports, then the country will have a current account surplus.
Options:
- True | - False
View Correct Answer & Detailed Explanation
Explanation: Balance of payment statement is broadly divided into current and capital accounts. If imports are more than exports, the country will have a current account deficit. If exports are more than imports, it will have a current account surplus.
Q 29. In __________ bias, investors look for evidence of some other investors buying specific securities.
Options:
- Loss-aversion bias | - Herd mentality | - Confirmation bias | - Gambler's fallacy
View Correct Answer & Detailed Explanation
Explanation: Herd mentality: This is a common behaviour disorder in investing community. This bias is an outcome of uncertainty and a belief that others may have better information, which leads investors to follow the investment choices that others make. Small investors keep watching other participants for confirmation and then end up entering when the markets are over heated and poised for correction.
Q 30. A Rights Issue is open for subscription for a MAXIMUM period of __________ days.
Options:
- 10 | - 15 | - 20 | - 30
View Correct Answer & Detailed Explanation
Explanation: A rights issue is open for subscription for a minimum period of 15 days and a maximum period of 30 days.
Q 31. As per the concept popularized by Benjamin Graham and Warren Buffett, __________ means purchasing a security when its market price is significantly below its intrinsic value, thereby minimizing downside risk.
Options:
- Margin of Assurance | - Margin of Positivity | - Margin of Safety | - Margin of Profits
View Correct Answer & Detailed Explanation
Explanation: The Margin of Safety (MOS) is a principle popularized by Benjamin Graham and Warren Buffett, where investors seek to buy securities at prices significantly below their intrinsic value. This gap provides a cushion—or margin—against errors in judgment or unforeseen market declines.
Q 32. Identify which is NOT a view based section in a stock research report.
Options:
- Financial Ratios | - Share holding patter | - Segment-wise revenue | - All of the above
View Correct Answer & Detailed Explanation
Explanation: In a stock research report, view-based sections typically refer to the analyst's opinions, forecasts or recommendations. The options listed above are all factual and data-driven sections rather than opinion-based.
Q 33. Regarding the healthcare (hospitals) industry, which of these factors play a role?
Options:
- Medical technology advancements
- Impact of an ageing population
- Both of the above
- Neither of the above
View Correct Answer & Detailed Explanation
Explanation: Ageing Population: Older individuals typically require more medical care. Medical Technologies Advancement: Improves diagnostics and treatment options, though it increases capital investment needs.
Q 34. The decline in the value of an investor's holdings due to falling security prices is categorized under which type of risk?
Options:
- Credit Risk | - Interest Rate Risk | - Liquidity Risk | - Market Risk
View Correct Answer & Detailed Explanation
Explanation: Market risk refers to the risk of the loss of value in an investment because of adverse price movements in an asset in the market, influenced by economy, sentiment, and global trends.
Q 35. Which of the following best describes an expansionary fiscal policy?
Options:
- Government's spending exceeds its income
- Government's spending is lower than its income
- Government's income and expenditure are same
- None of the above
View Correct Answer & Detailed Explanation
Explanation: Expansionary fiscal policy is used by governments to stimulate the economy. It involves increasing government spending or reducing taxes, creating a fiscal deficit to boost total demand.
Q 36. Companies are required to disclose Related Party Transactions so that shareholders can assess whether certain transactions are unfairly benefiting some parties—such as promoters. State whether True or False?
Options:
- True | - False
View Correct Answer & Detailed Explanation
Explanation: RPTs carry a higher risk of conflict of interest. Mandating disclosure (under SEBI LODR) protects minority shareholders and ensures fairness in corporate governance.
Q 37. Which division under the Ministry of Finance oversees the disinvestment of the Government of India's (GOI) stake in public sector undertakings (PSUs)?
Options:
- Department of Revenue | - Department of Economic Affairs | - Department of Internal Trade | - Department of Disinvestment
View Correct Answer & Detailed Explanation
Explanation: Department of Disinvestments (now DIPAM) is responsible for the policy approach to disinvestment and privatization of Public Sector undertakings.
Q 38. Identify the correct statement with respect to Additional Tier 1 Perpetual bonds.
Options:
- Junior to deposits but senior to other bonds
- Junior to deposits, interbank loans, and all other bonds
- Ranked below common equity
- Rank below deposits but above other bonds
View Correct Answer & Detailed Explanation
Explanation: AT1 bonds are hybrid instruments for capital adequacy. They are subordinate to deposits and all other bonds, meaning in distress, they rank below all debt but are senior to common equity.
Q 39. Identify the correct statement with respect to Speculators.
Options:
- Speculators focus on short-term trades based on price volatility
- Speculators operate under the belief that prices will continuously fall
- Speculators aim for long-term gains adopting 'buy and hold'
- Speculators operate with the belief that share prices will consistently rise
View Correct Answer & Detailed Explanation
Explanation: Speculators take short-term positions to profit from price fluctuations. Unlike investors, they are not focused on fundamentals or long-term compounding.
Q 40. Under SEBI's corporate governance framework, how many board members must be independent directors when the chairman is also an executive director?
Options:
- At least 10% | - At least 50% | - At least 65% | - At least 33%
View Correct Answer & Detailed Explanation
Explanation: Under SEBI LODR, if the Chairman is an Executive Director, at least 50% of the board must be independent. If the Chairman is a Non-Executive Director, it is 33% (one-third).
Q 41. An analyst relies on multiple information sources while evaluating a company. Which set best reflects suitable sources?
Options:
- Company filings and exclusive authorised representatives
- Company filings, management, industry experts, customers and suppliers
- Company filings, regulatory bodies, market traders, and social media
- Only company filings
View Correct Answer & Detailed Explanation
Explanation: Analysts need a wide range of credible sources (360-degree view). Social media and market traders are often biased and unreliable.
Q 42. With reference to a Rights Issue, which statement correctly describes the choices available to investors?
Options:
- Must either exercise or transfer
- May exercise or relinquish but not transfer
- May exercise, transfer or relinquish the rights
- Required to compulsorily exercise
View Correct Answer & Detailed Explanation
Explanation: Rights are flexible. Shareholders can buy the shares (exercise), sell the rights to others (transfer/renounce), or simply ignore them (relinquish).
Q 43. Which of the following sectors is generally considered to be highly cyclical in nature?
Options:
- Food and beverages | - Healthcare | - Capital goods | - Pharmaceuticals
View Correct Answer & Detailed Explanation
Explanation: Capital goods (machinery, construction) depend on investment cycles. In booms, demand is high; in downturns, companies postpone big purchases.
Q 44. Which item among the following appears in a company's Income statement?
Options:
- Long term debt | - Cost of goods sold | - Fixed assets | - Accounts receivable
View Correct Answer & Detailed Explanation
Explanation: COGS is an expense appearing on the Income Statement. Debt, Assets, and Receivables are items found on the Balance Sheet.
Q 45. With respect to technical analysis, which of the following statements correctly describes the Average Directional Index (ADX)?
Options:
- Another name for directional indicators
- Average of 12-day and 26-day EMA
- Indicator used to assess trend strength
- Primarily used to identify reversals
View Correct Answer & Detailed Explanation
Explanation: ADX measures trend strength regardless of direction. High value = strong trend; low value = sideways market.
Q 46. Which sequence correctly represents the typical stages of a business life cycle?
Options:
- Pioneer → Maturity → Growth
- Growth → Pioneer → Maturity
- Pioneer → Growth → Maturity
- Growth → Maturity → Pioneer
View Correct Answer & Detailed Explanation
Explanation: Businesses start in the Pioneer stage, move to Growth with expanding sales, and eventually stabilize in the Maturity phase.
Q 47. In SWOT analysis, which of the following factors represents a weakness?
Options:
- Decline in profits due to one-time expenses
- Insufficient research and development (R&D) capabilities
- Sales growth lower than industry average
- All of the above
View Correct Answer & Detailed Explanation
Explanation: Weaknesses are internal structural deficiencies. Insufficient R&D is a clear internal weakness. One-time profit declines or external sales growth comparisons are often classified as threats or temporary events.
Q 48. The risk arising from an investor's inability to quickly convert investments into cash is classified under which type of risk?
Options:
- Credit risk | - Liquidity risk | - Interest rate risk | - Market risk
View Correct Answer & Detailed Explanation
Explanation: Liquidity risk is the inability to sell an asset quickly at a fair price.
Q 49. The regulator that administers and supervises the capital markets in India is :
Options:
- SEBI | - RBI | - Finance Ministry | - Commerce Ministry
View Correct Answer & Detailed Explanation
Explanation: The Securities and Exchange Board of India (SEBI) is the statutory regulator for capital markets, protecting investors and ensuring fair practices.
Q 50. Under the Securities Contracts (Regulation) Act, 1956, which activities are included?
Options:
- Corporatization and demutualization of stock exchanges
- Granting official recognition to stock exchanges
- Prohibiting undesirable speculation
- All of the above
View Correct Answer & Detailed Explanation
Explanation: The SCRA governs the legal aspects of stock exchange operations, recognition, and the maintenance of orderly markets by curbing speculation.
End of Part mock test 15 450/600
Dhaval Visariya
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