Q1. What does Security Analysis and Portfolio Management (SAPM) primarily deal with?
A. Marketing and sales
B. Tax planning and auditing
C. Investment decision-making
D. Loan disbursement
✅ Answer: C. Investment decision-making
Q2. Which of the following is NOT a type of security in the financial market?
A. Stocks
B. Bonds
C. Real estate property
D. Derivatives
✅ Answer: C. Real estate property
Q3. What is the primary objective of portfolio management?
A. Maximizing taxes
B. Avoiding all risks
C. Aligning investments with goals and managing risk
D. Minimizing investment
✅ Answer: C. Aligning investments with goals and managing risk
Q4. What is meant by a “portfolio”?
A. A single high-value investment
B. A combination of different investments
C. A loan repayment method
D. An insurance scheme
✅ Answer: B. A combination of different investments
Q5. What is the main difference between investment and speculation?
A. Investment is for fun
B. Speculation avoids risk
C. Investment involves moderate return and longer horizon
D. Speculation relies on fundamental analysis
✅ Answer: C. Investment involves moderate return and longer horizon
Q6. In speculation, which of the following is commonly true?
A. Decisions based on in-depth analysis
B. Uses self-generated funds
C. Willingness to assume high risk
D. Low return expectation
✅ Answer: C. Willingness to assume high risk
Q7. What defines a financial asset?
A. Tangible items like buildings
B. Intangible instruments representing claims on real assets
C. Jewelry or commodities
D. Factory equipment
✅ Answer: B. Intangible instruments representing claims on real assets
Q8. Which is an example of a financial asset?
A. Machinery
B. Stock certificate
C. House
D. Land
✅ Answer: B. Stock certificate
Q9. What are real assets primarily concerned with?
A. Paper-based contracts
B. Tradable equity
C. Physical and tangible items
D. Derivative trading
✅ Answer: C. Physical and tangible items
Q10. Money markets primarily deal with:
A. Long-term investments
B. Real estate
C. Short-term debt instruments
D. Equities
✅ Answer: C. Short-term debt instruments
Q11. Capital markets are known for trading in:
A. Commodities
B. Short-term treasury bills
C. Long-term securities
D. Derivatives only
✅ Answer: C. Long-term securities
Q12. What does “liquidity” refer to in investments?
A. Ability to reduce taxes
B. Ability to avoid risk
C. Ease of converting an asset to cash
D. Increase in value over time
✅ Answer: C. Ease of converting an asset to cash
Q13. Which of the following best describes “return” in investment terms?
A. The emotional gain from investment
B. The tax savings obtained
C. The financial benefit or profit derived
D. The cost of investment
✅ Answer: C. The financial benefit or profit derived
Q14. Which of these is a phase in portfolio management?
A. Product positioning
B. Formulation of portfolio strategy
C. Brand management
D. Cost accounting
✅ Answer: B. Formulation of portfolio strategy
Q15. In SAPM, asset allocation refers to:
A. Selling off non-performing assets
B. Assigning employees to departments
C. Distributing investments across various asset classes
D. Predicting stock prices
✅ Answer: C. Distributing investments across various asset classes
Q16. What does diversification aim to reduce?
A. Returns
B. Investment
C. Overall risk
D. Market trends
✅ Answer: C. Overall risk
Q17. Fundamental analysis focuses on:
A. Stock chart patterns
B. News headlines
C. A company’s financial health and economic factors
D. Short-term price movements
✅ Answer: C. A company’s financial health and economic factors
Q18. Technical analysis is primarily based on:
A. Tax policies
B. Government budgets
C. Historical price and volume trends
D. Company mission statements
✅ Answer: C. Historical price and volume trends
Q19. Portfolio rebalancing is done to:
A. Increase debt
B. Minimize profit
C. Realign the portfolio with investment goals
D. Remove all low-risk securities
✅ Answer: C. Realign the portfolio with investment goals
Q20. Which of the following is NOT a key element of SAPM?
A. Financial statement auditing
B. Security analysis
C. Portfolio construction
D. Risk-return trade-off
✅ Answer: A. Financial statement auditing
Q21. Who are the primary players in the financial system?
A. Architects and Engineers
B. Investors, Financial Institutions, and Regulators
C. Policymakers only
D. Only banks
✅ Answer: B. Investors, Financial Institutions, and Regulators
Q22. Which of the following investments offers the highest liquidity?
A. Land
B. Fixed deposit
C. Stocks
D. Gold jewelry
✅ Answer: C. Stocks
Q23. What is the main purpose of a financial institution in the investment ecosystem?
A. Create marketing strategies
B. Manufacture physical goods
C. Facilitate capital flow and financial services
D. Write business laws
✅ Answer: C. Facilitate capital flow and financial services
Q24. Which phase involves revising the existing portfolio to align with market changes?
A. Portfolio selection
B. Portfolio revision
C. Security analysis
D. Tax adjustment
✅ Answer: B. Portfolio revision
Q25. Which term refers to the sacrifice of current money for future benefits?
A. Gambling
B. Taxation
C. Investment
D. Expense
✅ Answer: C. Investment
Q26. What differentiates gambling from investment?
A. Timing and risk are unknown in investment
B. Gambling is based on economic value
C. Gambling outcomes are almost immediate and for fun
D. Gambling requires portfolio planning
✅ Answer: C. Gambling outcomes are almost immediate and for fun
Q27. Which of the following is a broad class of assets?
A. Bonds
B. Land
C. Equities
D. All of the above
✅ Answer: D. All of the above
Q28. What is meant by “tax shelter” in investment attributes?
A. Tax refund schemes
B. A method to increase risk
C. Investment advantage to reduce tax liability
D. Hiding wealth from the government
✅ Answer: C. Investment advantage to reduce tax liability
Q29. What is the first phase in portfolio management?
A. Asset allocation
B. Portfolio execution
C. Investment objective specification
D. Security selection
✅ Answer: C. Investment objective specification
Q30. What is considered a long-term financial goal for an investor?
A. Buying lunch
B. Retirement planning
C. Daily grocery shopping
D. Fuel expense
✅ Answer: B. Retirement planning
Q31. Which of the following is a feature of speculative activity?
A. Uses self-generated funds
B. Avoids high risk
C. Expects moderate return
D. Decisions often based on emotions or market rumors
✅ Answer: D. Decisions often based on emotions or market rumors
Q32. The connection between the financial system and the real economy involves:
A. Separate operations with no impact
B. Direct links where funds fuel production and consumption
C. Real estate only
D. Only government bonds
✅ Answer: B. Direct links where funds fuel production and consumption
Q33. What is the nature of timing in investment compared to speculation?
A. No difference
B. Investment has a short-term timing
C. Investment typically has a longer horizon
D. Speculation takes decades
✅ Answer: C. Investment typically has a longer horizon
Q34. Which financial market deals in long-term debt and equity?
A. Commodity market
B. Money market
C. Capital market
D. Derivative market
✅ Answer: C. Capital market
Q35. What is meant by “convenience” in investment attributes?
A. Ease of access, monitoring, and management
B. Risk reduction
C. Time to maturity
D. Tax filing
✅ Answer: A. Ease of access, monitoring, and management
Q36. Who typically relies on fundamental factors for decision-making?
A. Gamblers
B. Investors
C. Speculators
D. Creditors
✅ Answer: B. Investors
Q37. In financial terms, liquidity implies:
A. Ability to freeze assets
B. Ability to earn returns
C. Speed of converting assets into cash
D. Tax savings
✅ Answer: C. Speed of converting assets into cash
Q38. Which of the following is not a part of investment implementation and review?
A. Portfolio evaluation
B. Portfolio selection
C. Tax collection
D. Investment performance analysis
✅ Answer: C. Tax collection
Q39. Who uses mostly self-generated funds?
A. Speculators
B. Gamblers
C. Investors
D. Brokers
✅ Answer: C. Investors
Q40. Which of the following is a capital market instrument?
A. Treasury bill
B. Commercial paper
C. Equity shares
D. Call money
✅ Answer: C. Equity shares
Q41. Which of the following is NOT a financial market?
A. Money market
B. Capital market
C. Stock exchange
D. Real estate market
✅ Answer: D. Real estate market
Q42. Which of these is a characteristic of speculation?
A. Focuses on long-term value
B. Seeks very high returns in short term
C. Avoids risky instruments
D. Based on solid research only
✅ Answer: B. Seeks very high returns in short term
Q43. Derivatives are classified as:
A. Real assets
B. Commodities
C. Financial instruments based on underlying assets
D. Tax shelters
✅ Answer: C. Financial instruments based on underlying assets
Q44. What role do financial institutions play in the financial system?
A. Manage only savings accounts
B. Regulate land pricing
C. Channel funds from savers to borrowers
D. Conduct school exams
✅ Answer: C. Channel funds from savers to borrowers
Q45. The investment strategy phase in portfolio management includes:
A. Evaluating real estate
B. Deciding sector exposure, risk level, and time horizon
C. Filing taxes
D. Collecting dividends
✅ Answer: B. Deciding sector exposure, risk level, and time horizon
Q46. In investment terminology, “risk” refers to:
A. Sure-shot gain
B. Potential for loss or variability in returns
C. Government taxes
D. Increase in inflation
✅ Answer: B. Potential for loss or variability in returns
Q47. Speculators often use which of the following sources of funds?
A. Business profits
B. Loans or leveraged positions
C. Tax refunds
D. Family inheritance only
✅ Answer: B. Loans or leveraged positions
Q48. A fundamental analyst would most likely study:
A. Astrological trends
B. Price charts only
C. Company earnings and industry conditions
D. Instagram trends
✅ Answer: C. Company earnings and industry conditions
Q49. Why is diversification important in portfolio construction?
A. To maximize taxes
B. To increase speculation
C. To spread risk across different asset types
D. To avoid investing at all
✅ Answer: C. To spread risk across different asset types
Q50. Which phase comes immediately after asset allocation?
A. Portfolio revision
B. Specification of objectives
C. Selection of securities
D. Tax planning
✅ Answer: C. Selection of securities
Q51. What is portfolio evaluation primarily concerned with?
A. Investment objectives
B. Taxation
C. Measuring performance against a benchmark
D. Asset allocation
✅ Answer: C. Measuring performance against a benchmark
Q52. Which of the following best defines a 'security'?
A. A physical asset
B. A negotiable financial instrument representing value
C. A type of insurance
D. A tax document
✅ Answer: B. A negotiable financial instrument representing value
Q53. What is one of the main differences between real and financial assets?
A. Financial assets depreciate, real assets don’t
B. Financial assets are intangible, real assets are tangible
C. Real assets can be sold, financial assets cannot
D. Financial assets are never liquid
✅ Answer: B. Financial assets are intangible, real assets are tangible
Q54. What is the most common objective of investment?
A. Tax evasion
B. Quick wealth creation
C. Income and capital appreciation
D. Taking high risks
✅ Answer: C. Income and capital appreciation
Q55. The CAPM model is used to evaluate:
A. Physical risk
B. Insurance cost
C. Expected return vs risk
D. Transaction fees
✅ Answer: C. Expected return vs risk
Q56. The term “market efficiency” refers to:
A. The cost of trading
B. Government regulation
C. The speed at which prices reflect all available information
D. Investor confidence
✅ Answer: C. The speed at which prices reflect all available information
Q57. Beta in portfolio theory measures:
A. Liquidity
B. Taxability
C. Systematic risk
D. Fund manager fees
✅ Answer: C. Systematic risk
Q58. The Efficient Market Hypothesis (EMH) implies that:
A. Investors can consistently outperform the market
B. Prices always reflect all available information
C. Fundamental analysis always works
D. Technical analysis is superior
✅ Answer: B. Prices always reflect all available information
Q59. A stock with a beta > 1 is considered:
A. Risk-free
B. More volatile than the market
C. A bond
D. Undervalued
✅ Answer: B. More volatile than the market
Q60. Diversification helps in reducing:
A. Systematic risk
B. Capital gains
C. Unsystematic risk
D. Investment returns
✅ Answer: C. Unsystematic risk
Q61. In technical analysis, a “support level” indicates:
A. Highest price a stock can reach
B. A level at which the stock is expected to fall
C. A price at which a stock tends to stop falling
D. Volume of shares traded
✅ Answer: C. A price at which a stock tends to stop falling
Q62. Which of the following tools is used in technical analysis?
A. Balance sheet
B. Income statement
C. Moving averages
D. Cash flow analysis
✅ Answer: C. Moving averages
Q63. The risk-free rate is generally represented by:
A. Company fixed deposits
B. Government bonds
C. Real estate returns
D. Mutual fund yields
✅ Answer: B. Government bonds
Q64. What does a P/E ratio represent?
A. Profit per equity
B. Price-to-earnings valuation
C. Performance of employee
D. Purchase-entry valuation
✅ Answer: B. Price-to-earnings valuation
Q65. The purpose of asset allocation is to:
A. Predict future returns
B. Eliminate all risk
C. Distribute investments across asset classes
D. Buy more bonds
✅ Answer: C. Distribute investments across asset classes
Q66. The Sharpe Ratio measures:
A. Market volatility
B. Portfolio’s risk-adjusted return
C. Transaction costs
D. Margin requirement
✅ Answer: B. Portfolio’s risk-adjusted return
Q67. A well-diversified portfolio contains assets that are:
A. Perfectly correlated
B. Completely uncorrelated
C. Positively correlated
D. Low or negatively correlated
✅ Answer: D. Low or negatively correlated
Q68. When should an investor rebalance their portfolio?
A. Every day
B. When asset allocation drifts from target
C. Never
D. Only during bull markets
✅ Answer: B. When asset allocation drifts from target
Q69. Which statement about systematic risk is correct?
A. It can be diversified away
B. It affects only individual stocks
C. It affects the whole market
D. It is caused by insider trading
✅ Answer: C. It affects the whole market
Q70. An example of unsystematic risk is:
A. Inflation
B. Recession
C. A company's CEO resigning
D. Oil price hike
✅ Answer: C. A company's CEO resigning
Q71. Which market efficiency form assumes all public and private information is reflected in prices?
A. Weak
B. Semi-strong
C. Strong
D. Fundamental
✅ Answer: C. Strong
Q72. Which technique is based on chart patterns and market sentiment?
A. Technical analysis
B. Fundamental analysis
C. Ratio analysis
D. Cost accounting
✅ Answer: A. Technical analysis
Q73. The intrinsic value of a stock is estimated using:
A. Technical indicators
B. Historical stock prices
C. Discounted cash flows
D. Market news
✅ Answer: C. Discounted cash flows
Q74. Which financial statement best indicates a company’s profitability?
A. Balance Sheet
B. Income Statement
C. Cash Flow Statement
D. Statement of Retained Earnings
✅ Answer: B. Income Statement
Q75. Mutual funds allow investors to:
A. Trade in commodities
B. Invest in a diversified portfolio managed by professionals
C. Only buy company bonds
D. Avoid taxes completely
✅ Answer: B. Invest in a diversified portfolio managed by professionals
Q76. What is an ETF (Exchange-Traded Fund)?
A. A private equity fund
B. A passively managed fund traded like a stock
C. A bond
D. A mutual fund not listed on exchanges
✅ Answer: B. A passively managed fund traded like a stock
Q77. What role do ratings agencies like CRISIL and ICRA play in SAPM?
A. Set interest rates
B. Provide creditworthiness assessments
C. Buy and sell securities
D. Create mutual funds
✅ Answer: B. Provide creditworthiness assessments
Q78. Dollar-cost averaging helps to:
A. Maximize losses
B. Invest only during market highs
C. Reduce timing risk by investing periodically
D. Invest in foreign currencies
✅ Answer: C. Reduce timing risk by investing periodically
Q79. The 'alpha' of a portfolio represents:
A. Risk-free return
B. Excess return over the benchmark
C. Market return
D. Expense ratio
✅ Answer: B. Excess return over the benchmark
Q80. What does a negative alpha indicate?
A. Strong market performance
B. Portfolio underperformed its benchmark
C. Investor earned tax rebates
D. Zero risk
✅ Answer: B. Portfolio underperformed its benchmark
Q81. Which instrument gives fixed income over a period of time?
A. Equity shares
B. Bonds
C. Derivatives
D. Real estate
✅ Answer: B. Bonds
Q82. Which risk is associated with interest rate changes?
A. Liquidity risk
B. Market risk
C. Interest rate risk
D. Operational risk
✅ Answer: C. Interest rate risk
Q83. What is the purpose of a benchmark in portfolio evaluation?
A. Legal compliance
B. Tax calculation
C. Comparison standard for performance
D. Increase expense ratio
✅ Answer: C. Comparison standard for performance
Q84. In the context of mutual funds, NAV stands for:
A. Net Allocation Value
B. Net Asset Value
C. New Asset Valuation
D. National Average Value
✅ Answer: B. Net Asset Value
Q85. Portfolio revision involves:
A. Choosing initial assets
B. Ignoring market changes
C. Rebalancing based on performance and goals
D. Filing tax returns
✅ Answer: C. Rebalancing based on performance and goals
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