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Finance Term 1 Practice Questions

The document contains practice questions and numerical problems related to finance, covering topics such as financial management, goal setting, investment strategies, inflation, and portfolio creation. It also includes multiple-choice questions about the book-building process and IPOs, as well as practical investment scenarios for calculations. Overall, it serves as a comprehensive guide for exam preparation in finance.

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gudduk23march2007
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9 views3 pages

Finance Term 1 Practice Questions

The document contains practice questions and numerical problems related to finance, covering topics such as financial management, goal setting, investment strategies, inflation, and portfolio creation. It also includes multiple-choice questions about the book-building process and IPOs, as well as practical investment scenarios for calculations. Overall, it serves as a comprehensive guide for exam preparation in finance.

Uploaded by

gudduk23march2007
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Finance

Term 1 Practice Questions for Exam

●​ Why is Financial Management important? Explain this with the help of an


example.
●​ “In a situation of financial crunch, needs will be prioritized.”. Justify this
statement with a suitable example.
●​ Differentiate between needs and wants. Can want ever be considered
needs? Why or why not?
●​ How do you determine whether something is a need or a want?
●​ Explain SMART goals. Give two examples of your SMART Goals detailing what
stands SMART in them.
●​ Why is Goal Setting important?
●​ What are the differences between short-term and long-term financial goals? How
do you balance the two?
●​ Write down the factors affecting goal setting for individuals.
●​ Write down the factors affecting goal setting for business.
●​ How does inflation affect you as an individual?
●​ What do you think is a more accurate method of calculating inflation - CPI or
WPI?
●​ How does inflation impact the purchasing power of individuals and their ability to
save money?
●​ How can the power of compounding be applied in other areas of life, such as
personal development or business growth? Can you provide any examples?
●​ How does the power of compounding impact long-term investing? Can you
provide any real-life examples?
●​ What factors can impact the future value of an investment?
●​ What do you mean by present value?
●​ How PV is different from FV?
●​ Write the scenarios where PV can be an important factor to consider while
investing.
●​ What is investment?
●​ “Investments will always result in wealth creation”. Write your viewpoint on the
statement with apt reasoning.
●​ What is the difference between stocks and bonds? Which one is generally
considered less risky and why?
●​ What are the advantages and disadvantages of investing in mutual funds? How
do they differ from stocks and bonds?
●​ What is diversification? What is the importance of diversification while creating an
investment portfolio?
●​ What are some different types of asset classes, and what are the key features of
each?
●​ How do different asset classes perform over time, and what are some factors that
can affect their performance?
●​ Why do investment decisions hold a crucial importance while making
investments?
●​ “A 25-year-old young boy and 65-year-old man will take similar decisions on
investment aggressively in equities”. Do you agree? Give a reason in support of
your answer.
●​ Briefly explain the various types of portfolios.
●​ What are some common financial instruments to create a financial portfolio?
●​ What are the key components of a portfolio?
●​ Write down the various factors that an investor should keep in mind while
creating a portfolio for the investment.
●​ Which components are most relevant to your goals and field of interest?
●​ Write a short on the financial market
●​ Differentiate between primary markets and secondary markets.
●​ Name a few instruments of capital market and money market.
●​ What are some examples of securities traded in the stock market?
●​ Try to locate a prospectus and read it for what it contains. Do you think it is like
an advertisement for the company?
●​ What care should be taken while drafting the prospectus?
●​ What do you think financial book building is?
●​ Why do you think it's important to learn about financial book building?
●​ Explain the IPO allotment process
●​ Have you heard of Stock Broking firms? What are the qualifications to be
employed in these firms?

MCQs

●​ How does the book-building process contribute to reducing underpricing of


shares during an IPO?
a) By setting a fixed issue price regardless of investor demand
b) By allowing retail investors to bid before institutional investors
c) By determining the cut-off price based on maximum demand
d) By limiting the participation of qualified institutional buyers

●​ What is the outcome of a successful book-building process during an IPO in


India?
a) Investors receive dividends immediately
b) The company's shares are listed on the stock exchange
c) Investors are guaranteed a fixed return on investment
d) The lead managers become partial owners of the company

●​ During the book-building process, what do investors indicate when placing bids
for shares?
a) The number of shares they want to sell
b) The price at which they want to buy shares
c) The company's industry sector
d) The company's founding year

Numericals
●​ Rishibha wants to invest Rs.1,00,000 and came across two investment options.
Options details are listed below with annual compounding.
ROI (%) Tenure (years) Amount Received
Option A - 10 4 146410
Option B - 7 8 171818.62
Advise her on which plan she should take and why.
●​ John invested Rs. 1,000 which earns an annual return of 10%. How much will his
investment be worth in 10 years?
●​ What will be the value of the investment at maturity if the investment made today
is Rs. 10,000 invested at 10%p.a. compounded annually for 5 years?
●​ A person wants to accumulate Rs. 50,000 in 6 years by investing in an account
that offers 8% annual interest, compounded yearly. How much should they invest
today?
●​ An investor deposits Rs. 15,000 in a fixed deposit that offers 12% interest per
annum, compounded annually. What will be the value of the investment after 4
years?
●​ A businessman needs Rs. 1,00,000 in 7 years. If the bank offers an annual
interest rate of 9%, compounded annually, how much should he invest today?
●​ A person invests Rs. 5,000 in a savings scheme that provides 6% interest per
annum, compounded annually. Find the future value after 10 years.
●​ A sum of Rs. 20,000 is invested in a scheme that offers 7% per annum
compounded annually. What will be the maturity value after 3 years?
●​ Ramesh starts investing Rs. 10,000 at the age of 25. The investment generates
an average annual return of 12%. How much will he have when he turns 45?

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