REVISION OF SHORT QUESTIONS OF FUNDAMENTAL OF INVESTMENT

•    QUICK REVISION OF PREVIOUS PAPER

•    FUNDAMENTAL OF INVESTMENT/SAPM

•    PREVIOUS LONG QUESTION

1.       WRITE A NOTE ON NATURE AND SCOPE OF INVESTMENT MANAGEMENT. WHAT ARE THE OBJECTIVE OF INVESTMENT MANAGEMENT

2.       WHAT DO YOU MEAN BY RETURN. HOW WOULD YOU MEASURE THE RETURN IN DIFFERENT  TYPES OF SECURITIES

3.       WHAT ARE THE DIFFERENT INVESTMENT ALTERNATIVES FOR INDIVIDUAL AND EVALUTE THE RISK RETURN CHARACTERISTICS

4.       WHAT DO YOU MEAN BY VALUATION OF DEBENTURES? EXPLAIN THE DIFFERENT METHODS WHICH CAN BE USED FOR VALUATION OF DEBENTURES

5.       WHAT DO YOU MEAN BY INDUSTRY ANALYSIS. EXAMINE THE SIGNIFICANCE OF INDUSTRY ANALYSIS

6.       WHAT DO YOU MEAN BY CHART LIST TECHNIQUE. HOW DO YOU CHART LIST TECHNIQUE HELP

7.       WHAT DO YOU MEAN BY PORTFOLIO MANAGEMENT? EXAMINE THE DIFFERENT STEPS IN PORTFOLIO MGMT

•    SHORT QUESTION

1. UNSYSTEMATIC RISK
2. DERIVATIVE
3. DEBENTURES
4. SHARES
5. MUTUAL FUNDS
6. FUTURES
7. FUNDAMENTAL ANALYSIS
8. GROWTH MARKET
9. SUPPORT LEVEL
10. INSIDER TRADING
11. INTRINSIC VALUE OF THE SHARES
12. POINT AND FIGURE CHARTS

•    TOTAL RISK

•    TOTAL RISK =SYSTEMATIC RISK PLUS  UNSYSTEMATIC RISK

•    SYSTEMATIC RISK:- CAN NOT BE REDUCED BY DIVERSIFICATION. ALSO KNOWN AS MARKET RISK. ARISE ON ACCOUNT OF ECONOMY WIDE UNCERTAINTIES.

•    EXAMPLE:-

1.       CHANGE IN THE INTEREST POLICY

2.       RESTRICTIVE CREDIT POLICY

3.       WITHDRAWS TAX ON DIVIDEND PAYMENTS

4.       INTRODUCE CAPITAL GAIN TAX

•    UNSYSTEMATIC RISK

1.       CAN BE REDUCED THROUGH DIVERSIFICATION

2.       ARISES FROM THE UNIQUE UNCERTAINTIES OF INDIVIDUAL SECURITIES

3.       UNCERTAINTIES OF INDIVIDUAL SECURITIES IN A PORTFOLIO CANCEL OUT EACH OTHER

•    EXAMPLE:-

•                DECLARATION OF STRIKE IN THE COMPANY

•                LOSES A BIG CONTRACT

•                INNOVATION

•    DIFFERENCE BETWEEN SYSTEMATIC RISK AND UNSYSTEMATIC RISK

•    SYSTEMATIC RISK

1.       REFERS TO THE HAZARD WHICH IS ASSOCIATED WITH THE MARKET OR MARKET SEGMENT AS WHOLE

2.       UNCONTROLLABLE

3.       EXTERNAL FACTORS

4.       LARGE NUMBER OF SECURITIES AFFECTED BY IT

5.       INTEREST RISK,MARKET RISK,PURCHASING POWER RISK ETC

6.       PROTECTION BY ASSET ALLOCATION

•    UNSYSTEMATIC RISK

1.       UNSYSTEMATIC RISK REFERS TO THE RISK ASSOCIATED WITH PARTICULAR SECURITY,COMPANY OR INDUSTRY

2.       CONTROLLABLE

3.       INTERNAL FACTORS

4.       EFFECT PARTICULAR COMPANY

5.       BUSINESS RISK

6.       FINANCIAL RISK

7.       PROTECTION BY PORTFOLIO DIVERSIFICATION

•    MEANING OF DERIVATIVE

•    DERIVATIVES ARE FINANCIAL CONTRACTS THAT DERIVE THEIR VALUE FROM AN UNDERLYING ASSET. THESE COULD BE  STOCKS,INDICES,COMMODITIES,CURRENCIES,EXCHANGE RATES, OR THE RATE OF INTEREST. THESE FINANCIAL INSTRUMENTS ARE HELP IN MAKING PROFIT BY BETTING ON THE FUTURE VALUE OF THE UNDERLYING ASSET.

•    DERIVATIVES ARE A SPECIAL TYPE OF OFF BALANCE SHEET INSTRUMENT IN WHICH NO PRINCIPAL IS EVER PAID.

•    DERIVATIVES INVOLVE PAYMENT/RECEIPT OF INCOME GENERATED BY THE UNDERLYING ASSET ON A NOTIONAL PRINCIPAL.

•    FEATURES OF DERIVATIVE MARKET

1.       JUST LIKE ANY OTHER MARKET

2.       HIGHLY LEVERAGED MARKET

3.       MARKET VIEW IS AN IMPORTANT IN THE DERIVATIVE MARKET AS IN THE CASH MARKET.

4.       THE DERIVATIVE MARKET IS THE ONLY MARKET WHERE AN INVESTOR CAN GO LONG AND SHORT ON THE SAME ASSET AT SAME TIME

5.       IT CARRY RISK BUT STOCKS DO NOT

6.       FLEXIBLE

7.       MARGIN BASED TRADING MAKES TRADING IN DERIVATIVE PRODUCTS ATTRACTIVE

•    MEANING OF FORWARD

1.       OLDEST OF ALL THE DERIVATIVES.

2.       A FORWARD CONTRACT REFERS TO AN AGREEMENT BETWEEN TWO PARTIES TO EXCHANGE AN AGREED QUANTITY OF AN ASSETS FOR CASH AT A CERTAIN DATE IN FUTURE AT A PREDETERMINED PRICE SPECIFIED IN THAT AGREEMENT. THE PROMISED ASSET MAY BE CURRENCY,COMMODITY,INSTRUMENT ETC.

3.       IN A FORWARD CONTRACT, A USER ( HOLDER) WHO PROMISES TO BUY THE SPECIFIED ASSET AT AN AGREED PRICE AT FUTURE DATE IS SAID TO BE LONG POSITION.

4.       BUT ON THE OTHER HAND WHO PROMISE TO SELL AT AN AGREED PRICE AT FUTURE DATE IS SAID TO BE IN SHORT POSITION

•    MEANING OF FUTURE

1.       FUTURE ARE EXCHANGE TRADED CONTRACTS OR AGREEMENTS TO BUY OR SELL A SPECIFIED QUANTITY OF FINANCIAL INSTRUMENTS/COMMODITY IN DESIGNATED FUTURE MONTH AT A PRICE AGREED UPON THE SELLER AND BUYER.

2.       IT HAS CERTAIN STANDARDIZED SPECIFICATION:-

1.       QUANTITY OF THE UNDERLYING

2.       QUALITY OF THE UNDERLYING(NOT IN FINANCIAL FUTURE)

3.       DATE AND MONTH OF DELIVERY

4.       UNITS OF PRICE QUOTATION( NOT THE PRICE ITSELF) AND MINIMUM CHANGE IN PRICE( TICK SIZE) . A TICK IS CHANGE IN THE PRICE OF CONTRACT BE IT UP OR DOWN.

5.       LOCATION OF THE SETTLEMENT

·         FEATURES OF FUTURE

1. HIGHLY STANDARDIZED
2. DOWN PAYMENT
3. SETTLEMENTS
4. HEDGING OF PRICE RISKS
5. LINEARITY
6. SECONDARY MARKET
7. NON DELIVERY OF THE ASSETS

•    DIFFERENCE

•    FUTURE

1.       EXCHANGE TRADED CONTRACTS

2.       TERM ARE STANDARDIZED BY THE EXCHANGE

3.       TRANSPARENT

4.       MORE LIQUID

5.       A RANGE OF DELIVERY DATES

6.       MARKED TO MARKET DAILY

7.       CLOSED PRIOR TO DELIVERY

•    FORWARD

1.       NOT TRADED ON EXCHANGE

2.       CUSTOMIZED

3.       PRIVATE BILATERAL AGREEMENTS

4.       LESS LIQUID

5.       SINGLE DELIVERY DATE

6.       NOT

7.       NOT SETTLED UNTILL THE END OF ITS LIFE

•    DEBENTURES

1.       DEBENTURES ARE ISSUED IN THE FORM OF  DEBT INSTRUMENT USED BY THE CORPORATE FOR RAISING LONG TERM AS WELL AS SHORT TERM FUNDS

2.       DEBENTURES ARE ISSUED IN THE FORM OF CERTIFICATE OF INDEBTEDNESS UNDER COMMON SEAL OF THE COMPANY

3.       DEBENTURE HOLDERS ARE THE CREDITORS OF THE COMPANY. THE INTEREST MAY BE FLOATING OR FIXED

4.       EACH DEBENTURE HAS FIXED FACE VALUE

5.       DEBENTURES IS REDEEMED AFTER A FIXED PERIOD OF TIME

6.       MAY BE EITHER SECURED OR UNSECURED

7.       INTEREST PAYABLE ON A DEBENTURE IS CHARGE AGAINST PROFIT AND IT IS TAX DEDUCTIBLE EXPENDITURE

8.       DO NOT ENJOY VOTING RIGHT,

•    DIFFERENCE BETWEEN SHARE AND DEBENTURE

•    SHARE

1.       REFERS TO SHARE CAPITAL OF THE COMPANY

2.       THE HOLDER OF THE SHARE IS KNOWN AS SHAREHOLDER

3.       THEY ARE THE OWNER OF THE COMPANY

4.       GET THE DIVIDEND

5.       CAN BE PAID OUT OF DIVIDEND ONLY

6.       THEY HAVE VOTING RIGHT

7.       DIVIDEND IS AN APPROPRIATION OF PROFIT AND SO IT IS NOT ALLOWED AS DEDUCTION

8.       NO SECURITY FOR PAYMENT

9.       NEVER CONVERTED INTO DEBENTURES

10.   REPAID AFTER THE PAYMENT OF ALL THE LIABILITIES

11.   NO TRUST DEED

•     

•    DEBENTURE

1.       DEBENTURE REPRESENT THE DEBT OF THE COMPANY

2.       KNOWN AS DEBENTURE HOLDER AND THEY ARE THE CREDITOR OF THE COMPANY

3.       INTEREST HAS TO BE PAID TO DEBENTURE HOLDERS EVEN IF THERE IS NO PROFIT

4.       DO NOT HAVE VOTING RIGHT

5.       DIFFERENCE BETWEEN SHARE AND DEBENTURE

6.       INTEREST IS A BUSINESS EXPENSE SO IT IS ALLOWED AS DEDUCTION FROM PROFIT

7.       DEBENTURE MAY BE SECURED OR UNSECURED

8.       DEBENTURES CAN BE CONVERTED INTO SHARES

9.       THEY GET PRIORITY OVER SHARES

10.   IT IS CHARGE AGAINST PROFIT

11.   ISSUED TO THE PUBLIC TRUST DEED MUST BE EXECUTED