Q1. What is the primary goal of investment?
A. Immediate profit
B. Fun and entertainment
C. Sacrifice current resources for future benefits
D. Tax saving
✅ Answer: C. Sacrifice current resources for future benefits
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 major difference between financial and real assets?
A. Financial assets are tangible
B. Real assets cannot be owned
C. Financial assets represent claims on real assets
D. Real assets have no market value
✅ Answer: C. Financial assets represent claims on real assets
Q4. Which financial market deals with short-term debt instruments?
A. Capital market
B. Real estate market
C. Money market
D. Commodity market
✅ Answer: C. Money market
Q5. Who primarily avoids high risk in the financial markets?
A. Gamblers
B. Speculators
C. Investors
D. Market makers
✅ Answer: C. Investors
Q6. What differentiates investment from speculation?
A. Type of asset
B. Time horizon and risk attitude
C. Only speculation involves money
D. Investment is illegal
✅ Answer: B. Time horizon and risk attitude
Q7. What is the typical planning horizon for an investor?
A. Very short
B. One day
C. Very long
D. Longer than speculators
✅ Answer: D. Longer than speculators
Q8. In what aspect does gambling differ from investing?
A. It involves analysis
B. It is based on economic activity
C. Risk and timing are known
D. Gambling outcomes are almost immediate
✅ Answer: D. Gambling outcomes are almost immediate
Q9. What is the basis of decision-making for most speculators?
A. Cash flow statements
B. Fundamental analysis
C. Hearsay and market psychology
D. Industry trends
✅ Answer: C. Hearsay and market psychology
Q10. Which is NOT considered an attribute of investment?
A. Risk
B. Liquidity
C. Fun
D. Return
✅ Answer: C. Fun
Q11. What does liquidity refer to in investments?
A. The risk level
B. The return from dividends
C. Ease of converting to cash
D. Government support
✅ Answer: C. Ease of converting to cash
Q12. What is a portfolio?
A. A single bond investment
B. Collection of different investments
C. Real estate collection
D. Investment in a startup
✅ Answer: B. Collection of different investments
Q13. Which is a phase in portfolio management?
A. Buying only safe stocks
B. Trading derivatives
C. Asset allocation
D. Saving in bank accounts
✅ Answer: C. Asset allocation
Q14. What is the first step in portfolio management?
A. Portfolio revision
B. Execution of trades
C. Specification of investment objectives
D. Selection of securities
✅ Answer: C. Specification of investment objectives
Q15. What does ‘tax shelter’ mean in investments?
A. Investment that avoids taxes legally
B. High-risk investment
C. Government bonds
D. None of the above
✅ Answer: A. Investment that avoids taxes legally
Q16. What is the core focus of fundamental analysis?
A. Price movements
B. Media trends
C. Intrinsic value based on financial performance
D. Investor rumors
✅ Answer: C. Intrinsic value based on financial performance
Q17. Which market deals with long-term financial instruments like stocks and bonds?
A. Money market
B. Futures market
C. Capital market
D. Spot market
✅ Answer: C. Capital market
Q18. What distinguishes speculation from gambling?
A. Speculation involves fundamental analysis
B. Gambling supports the economy
C. Speculation has no risk
D. Gambling is for long-term gains
✅ Answer: A. Speculation involves fundamental analysis
Q19. Which type of player is most concerned with emotions and market psychology?
A. Fundamental analyst
B. Long-term investor
C. Speculator
D. Portfolio manager
✅ Answer: C. Speculator
Q20. Which of the following is an example of a financial institution?
A. IT company
B. Mutual fund
C. Car manufacturer
D. Retail shop
✅ Answer: B. Mutual fund
Q21. What is the most important consideration when constructing a portfolio?
A. Buying only trending stocks
B. Tax avoidance
C. Matching the investor’s goals and risk profile
D. Following social media advice
✅ Answer: C. Matching the investor’s goals and risk profile
Q22. Which of the following would be a short-term financial market instrument?
A. Equity shares
B. Treasury bills
C. Real estate
D. Preferred stock
✅ Answer: B. Treasury bills
Q23. Which asset class is least liquid?
A. Government bonds
B. Cash
C. Mutual funds
D. Real estate
✅ Answer: D. Real estate
Q24. What is an example of a real asset?
A. Stocks
B. Bonds
C. Land
D. Options
✅ Answer: C. Land
Q25. Which function involves executing investment decisions?
A. Asset allocation
B. Portfolio strategy
C. Portfolio execution
D. Investment objective setting
✅ Answer: C. Portfolio execution
Q26. What is the role of capital market expectations in portfolio management?
A. To define emotions
B. To reduce taxes
C. To quantify future market conditions
D. To list securities
✅ Answer: C. To quantify future market conditions
Q27. What does diversification help reduce in a portfolio?
A. Returns
B. Liquidity
C. Risk
D. Taxes
✅ Answer: C. Risk
Q28. Who provides the backbone for market functioning by matching savers and borrowers?
A. Manufacturing firms
B. Financial institutions
C. Social media influencers
D. Insurance brokers
✅ Answer: B. Financial institutions
Q29. Which term best describes "portfolio revision"?
A. Selling everything in panic
B. Reassessing and adjusting portfolio as per new data
C. Blindly following trends
D. Ignoring market changes
✅ Answer: B. Reassessing and adjusting portfolio as per new data
Q30. Which of the following is NOT typically an investment objective?
A. Return
B. Convenience
C. High risk for fun
D. Liquidity
✅ Answer: C. High risk for fun
Q31. What is the primary objective of portfolio evaluation?
A. Increase number of assets
B. Compare investor profiles
C. Measure portfolio performance against set objectives
D. Select new securities
✅ Answer: C. Measure portfolio performance against set objectives
Q32. Which of the following is NOT a phase of portfolio management?
A. Asset Allocation
B. Security Selection
C. Emotional Trading
D. Portfolio Revision
✅ Answer: C. Emotional Trading
Q33. What does the term 'liquidity' refer to in investment?
A. Tax benefits
B. Potential return
C. Ease of converting assets into cash
D. Portfolio risk
✅ Answer: C. Ease of converting assets into cash
Q34. Which attribute is LEAST associated with investment?
A. Return
B. Fun
C. Risk
D. Liquidity
✅ Answer: B. Fun
Q35. What distinguishes investment from savings?
A. Savings involve higher risk
B. Investment includes timing and risk for future gain
C. Savings need constant monitoring
D. Investment is always short-term
✅ Answer: B. Investment includes timing and risk for future gain
Q36. Who generally avoids high-risk investments?
A. Gamblers
B. Speculators
C. Investors
D. Traders
✅ Answer: C. Investors
Q37. What is the expected return outlook for an investor compared to a speculator?
A. Lower and stable
B. Exponentially high
C. Unpredictable
D. Zero
✅ Answer: A. Lower and stable
Q38. Which of the following is a component of the financial system?
A. Hardware companies
B. Shopping malls
C. Banks
D. Local government offices
✅ Answer: C. Banks
Q39. What is the main goal of asset allocation?
A. Focus only on stocks
B. Maximize short-term returns
C. Balance investment across various asset classes
D. Follow media trends
✅ Answer: C. Balance investment across various asset classes
Q40. How is investment policy different from portfolio revision?
A. It’s more focused on rumors
B. It happens after evaluation
C. It sets long-term strategy
D. It follows the market blindly
✅ Answer: C. It sets long-term strategy
Q41. What characterizes speculative investments?
A. Based on company fundamentals
B. Driven by long-term research
C. Often influenced by emotion or market psychology
D. Always government-backed
✅ Answer: C. Often influenced by emotion or market psychology
Q42. What do money markets typically deal with?
A. Long-term securities
B. Real estate
C. Short-term debt instruments
D. Corporate shares
✅ Answer: C. Short-term debt instruments
Q43. What is the key function of security analysis?
A. To follow social media influencers
B. To determine asset liquidity
C. To estimate intrinsic value and future performance
D. To diversify blindly
✅ Answer: C. To estimate intrinsic value and future performance
Q44. What factor makes gambling different from investment?
A. Market analysis
B. Known risk and immediate outcome
C. Long-term return expectations
D. Economic activity backing
✅ Answer: B. Known risk and immediate outcome
Q45. What does 'tax shelter' in investment mean?
A. Hiding income illegally
B. Government subsidy
C. Investment designed to reduce tax liabilities
D. Risk mitigation
✅ Answer: C. Investment designed to reduce tax liabilities
Q46. Which of the following best defines real assets?
A. Equities
B. Commodities
C. Derivatives
D. Land and machinery
✅ Answer: D. Land and machinery
Q47. What role does convenience play in investment decision-making?
A. It guarantees returns
B. It replaces risk analysis
C. It affects investor's willingness and ability to manage assets
D. It prevents liquidity
✅ Answer: C. It affects investor's willingness and ability to manage assets
Q48. What is the first step in the investment process?
A. Tax planning
B. Market gossip
C. Specification of investment objectives
D. Risk elimination
✅ Answer: C. Specification of investment objectives
Q49. What does portfolio implementation involve?
A. Execution and monitoring of investment strategy
B. Creating rumors
C. Short selling
D. Ignoring asset classes
✅ Answer: A. Execution and monitoring of investment strategy
Q50. Which one of the following represents a financial asset?
A. Factory building
B. Gold
C. Corporate bond
D. Mining equipment
✅ Answer: C. Corporate bond
Q51. Which is a key difference between financial and real assets?
A. Financial assets depreciate over time
B. Real assets are intangible
C. Financial assets represent claims on real assets
D. Real assets have no economic value
✅ Answer: C. Financial assets represent claims on real assets
Q52. What is meant by "portfolio revision"?
A. Creating a new asset
B. Making changes to portfolio to adapt to market or goal changes
C. Avoiding diversification
D. Reducing tax obligations
✅ Answer: B. Making changes to portfolio to adapt to market or goal changes
Q53. What does a well-diversified portfolio primarily help reduce?
A. Tax burden
B. Risk
C. Return
D. Convenience
✅ Answer: B. Risk
Q54. What is the primary focus of fundamental analysis?
A. Daily price movements
B. Macroeconomic factors and company fundamentals
C. Rumors and social trends
D. Arbitrage opportunities
✅ Answer: B. Macroeconomic factors and company fundamentals
Q55. Which phase of portfolio management involves setting constraints and goals?
A. Asset selection
B. Portfolio evaluation
C. Specification of investment objectives
D. Execution
✅ Answer: C. Specification of investment objectives
Q56. What is typically NOT a source of funds for a speculator?
A. Borrowed capital
B. Leverage
C. Personal savings
D. Government grants
✅ Answer: D. Government grants
Q57. What distinguishes an investor’s decision-making process from a speculator’s?
A. Depends on news articles
B. Uses fundamental factors more
C. Based entirely on emotions
D. Mostly technical indicators only
✅ Answer: B. Uses fundamental factors more
Q58. How do capital markets differ from money markets?
A. Deal with low-return investments
B. Deal with short-term instruments
C. Deal with long-term securities
D. Are mostly informal
✅ Answer: C. Deal with long-term securities
Q59. Which of these is an example of a derivative security?
A. Mutual fund
B. Equity share
C. Option contract
D. Real estate
✅ Answer: C. Option contract
Q60. Why is the concept of risk important in investments?
A. It ensures guaranteed returns
B. It provides tax benefits
C. It reflects uncertainty of return
D. It helps avoid savings
✅ Answer: C. It reflects uncertainty of return
Q61. What defines a "money market" instrument?
A. Long-term maturity
B. Issued by startups
C. High risk with high return
D. Short-term and highly liquid
✅ Answer: D. Short-term and highly liquid
Q62. Which financial market primarily trades bonds and equities?
A. Derivatives market
B. Capital market
C. Commodity market
D. Insurance market
✅ Answer: B. Capital market
Q63. What kind of outcome timing is associated with gambling?
A. Deferred outcome
B. Random outcome over years
C. Almost immediate outcome
D. No outcome at all
✅ Answer: C. Almost immediate outcome
Q64. Why are speculators more willing to assume risk?
A. They prefer lower returns
B. They are usually salaried
C. They seek higher and quicker returns
D. They avoid market analysis
✅ Answer: C. They seek higher and quicker returns
Q65. What kind of return expectation does an investor usually have?
A. Zero
B. Extremely high
C. Moderate and stable
D. Highly volatile
✅ Answer: C. Moderate and stable
Q66. What is the relationship between investment and economic activity?
A. Investment ignores the economy
B. Investment supports and is influenced by economic activity
C. Investment always leads to loss
D. Investment reduces employment
✅ Answer: B. Investment supports and is influenced by economic activity
Q67. Which player is NOT typically part of the financial system?
A. Banks
B. Insurance companies
C. Mutual funds
D. Construction laborers
✅ Answer: D. Construction laborers
Q68. Which of the following is a key role of financial institutions?
A. Setting global politics
B. Mobilizing savings into productive investments
C. Producing commodities
D. Creating apps
✅ Answer: B. Mobilizing savings into productive investments
Q69. What is the first thing to assess before starting a portfolio?
A. Buying real estate
B. Checking company websites
C. Understanding investment goals and risk tolerance
D. Downloading trading apps
✅ Answer: C. Understanding investment goals and risk tolerance
Q70. What attribute makes a security ‘marketable’?
A. High tax rate
B. Legal restrictions
C. Liquidity
D. Complexity
✅ Answer: C. Liquidity
Here is the continuation of the Security Analysis and Portfolio Management (SAPM) MCQs, from Q71 to Q90, following your preferred format:
Q71. What distinguishes a financial market from a financial institution?
A. Markets manage people, institutions manage funds
B. Markets enable trading, institutions facilitate financial services
C. Institutions are public only
D. Markets do not involve transactions
✅ Answer: B. Markets enable trading, institutions facilitate financial services
Q72. What does asset allocation primarily involve?
A. Choosing stocks only
B. Setting up a bank account
C. Distributing investments across asset categories
D. Avoiding bonds
✅ Answer: C. Distributing investments across asset categories
Q73. Why is liquidity important in investment decisions?
A. It reduces portfolio size
B. It prevents taxation
C. It enables quick conversion to cash
D. It increases interest rates
✅ Answer: C. It enables quick conversion to cash
Q74. Which of the following is an intangible financial asset?
A. Land
B. Machinery
C. Stock certificate
D. Apartment
✅ Answer: C. Stock certificate
Q75. How are investment strategies different from investment policies?
A. Strategy is short-term; policy is long-term
B. Strategy is emotional; policy is analytical
C. Strategy is informal; policy is illegal
D. Strategy is focused on execution, policy on guidelines
✅ Answer: D. Strategy is focused on execution, policy on guidelines
Q76. What is the key difference between speculation and investment in terms of duration?
A. Speculation is longer term
B. Investment is based on luck
C. Investment has a longer planning horizon
D. Speculation has guaranteed results
✅ Answer: C. Investment has a longer planning horizon
Q77. What type of risk do investors typically aim to avoid?
A. Systematic risk
B. Unsystematic risk
C. High risk
D. Risk from inflation
✅ Answer: C. High risk
Q78. What kind of return do speculators generally expect?
A. Low return
B. No return
C. Very high return
D. Guaranteed return
✅ Answer: C. Very high return
Q79. What typically funds investor activities?
A. Credit cards
B. Lottery winnings
C. Self-generated savings
D. Illegal sources
✅ Answer: C. Self-generated savings
Q80. Why is gambling not considered a form of investment?
A. It involves economic activity
B. It guarantees profits
C. It’s meant for entertainment with unpredictable outcomes
D. It always uses stock markets
✅ Answer: C. It’s meant for entertainment with unpredictable outcomes
Q81. What role does convenience play in investments?
A. It increases interest rate
B. It complicates asset selection
C. It allows easy handling of the investment
D. It reduces asset liquidity
✅ Answer: C. It allows easy handling of the investment
Q82. In portfolio management, what does "review" typically involve?
A. Ignoring performance
B. Regular assessment and necessary changes
C. Adding random securities
D. Avoiding investor input
✅ Answer: B. Regular assessment and necessary changes
Q83. Which market is suitable for trading short-term debt instruments?
A. Capital market
B. Commodity market
C. Money market
D. Real estate market
✅ Answer: C. Money market
Q84. What type of risk cannot be eliminated through diversification?
A. Business risk
B. Industry risk
C. Systematic risk
D. Firm-specific risk
✅ Answer: C. Systematic risk
Q85. What does the term “tax shelter” imply in investing?
A. A way to avoid investing
B. A method to delay tax payments
C. An investment that reduces tax liability
D. A risk-free return plan
✅ Answer: C. An investment that reduces tax liability
Q86. Why is return considered a key attribute of investment?
A. It helps to identify inflation
B. It indicates how profitable the investment is
C. It is not quantifiable
D. It reduces liquidity
✅ Answer: B. It indicates how profitable the investment is
Q87. Which of the following is NOT a typical constraint in portfolio construction?
A. Liquidity requirement
B. Risk tolerance
C. Tax considerations
D. Time zone difference
✅ Answer: D. Time zone difference
Q88. What is meant by the "investment horizon"?
A. The place where an investor lives
B. The time period for which an investor plans to hold an investment
C. The daily trading schedule
D. The distance to the nearest stock exchange
✅ Answer: B. The time period for which an investor plans to hold an investment
Q89. What defines a capital market instrument?
A. Used in barter systems
B. Short maturity and low risk
C. Long maturity and higher returns
D. Illegal securities
✅ Answer: C. Long maturity and higher returns
Q90. What is the purpose of evaluating a portfolio?
A. To avoid taxes
B. To reduce the number of securities
C. To measure its performance against objectives
D. To eliminate risk completely
✅ Answer: C. To measure its performance against objectives
Q91. What is the primary focus of portfolio revision?
A. Buying new homes
B. Real estate investments
C. Adjusting investments to maintain strategy alignment
D. Ignoring market trends
✅ Answer: C. Adjusting investments to maintain strategy alignment
Q92. Which of the following best describes a diversified portfolio?
A. Investing only in government bonds
B. Investing all money in gold
C. Holding a mix of different asset classes
D. Investing solely in one sector
✅ Answer: C. Holding a mix of different asset classes
Q93. What does risk-return tradeoff imply in investment?
A. High return comes with low risk
B. Investors always prefer low return
C. Greater potential returns are associated with greater risks
D. Return and risk are unrelated
✅ Answer: C. Greater potential returns are associated with greater risks
Q94. What is the main characteristic of money market instruments?
A. Long-term and illiquid
B. High-risk and volatile
C. Short-term and low-risk
D. Tied to real estate
✅ Answer: C. Short-term and low-risk
Q95. What does capital market primarily deal with?
A. Real estate properties
B. Long-term funding instruments
C. Cash deposits
D. Retail trading only
✅ Answer: B. Long-term funding instruments
Q96. Which phase involves the actual buying and selling of securities?
A. Portfolio evaluation
B. Portfolio revision
C. Portfolio execution
D. Investment objective setting
✅ Answer: C. Portfolio execution
Q97. What is an investor's 'risk appetite'?
A. Type of food consumed during trading
B. How often they check stock prices
C. Their willingness to take on investment risk
D. Their desire to avoid saving
✅ Answer: C. Their willingness to take on investment risk
Q98. Which investor prefers fundamental analysis over emotions?
A. Speculator
B. Gambler
C. Retail trader
D. Long-term investor
✅ Answer: D. Long-term investor
Q99. Which investment attribute relates to how easily it can be sold in the market?
A. Return
B. Liquidity
C. Tax shelter
D. Convenience
✅ Answer: B. Liquidity
Q100. What’s the role of ‘constraints’ in portfolio planning?
A. Encourage speculation
B. Define what the investor cannot or will not do
C. Increase gambling behavior
D. Eliminate performance measurement
✅ Answer: B. Define what the investor cannot or will not do
Q101. Which of the following is a real asset?
A. Equity shares
B. Mutual fund units
C. Residential property
D. Derivatives
✅ Answer: C. Residential property
Q102. What does “specification of investment objectives” refer to?
A. Identifying trading partners
B. Deciding on investor emotions
C. Clarifying goals like return and risk tolerance
D. Picking stock brokers
✅ Answer: C. Clarifying goals like return and risk tolerance
Q103. What is a derivative in financial markets?
A. An underlying asset
B. A physical commodity
C. A security derived from another asset’s value
D. A stock
✅ Answer: C. A security derived from another asset’s value
Q104. Which of the following is a financial institution?
A. Landowner
B. Mutual fund company
C. Real estate broker
D. Mining firm
✅ Answer: B. Mutual fund company
Q105. Who is more likely to fund their investments via borrowed funds?
A. Long-term investors
B. Retirees
C. Speculators
D. Banks
✅ Answer: C. Speculators
Q106. What is meant by “portfolio strategy”?
A. A roadmap to meet investment goals
B. Buying only insurance policies
C. Selling real estate
D. Ignoring asset performance
✅ Answer: A. A roadmap to meet investment goals
Q107. Why is portfolio evaluation important?
A. It avoids investment altogether
B. It determines the success of investment policy
C. It eliminates taxes
D. It reduces documentation
✅ Answer: B. It determines the success of investment policy
Q108. What typically follows the formulation of portfolio strategy?
A. Random trading
B. Policy constraint setting
C. Security selection
D. Risk profiling
✅ Answer: C. Security selection
Q109. What distinguishes a financial asset from a real asset?
A. Real assets are intangible
B. Financial assets have physical presence
C. Financial assets represent claims; real assets are tangible
D. Real assets are listed on exchanges
✅ Answer: C. Financial assets represent claims; real assets are tangible
Q110. Why is timing a crucial aspect of investment?
A. It helps avoid inflation
B. It determines the maturity of debt
C. It impacts the present value of returns
D. It reduces paperwork
✅ Answer: C. It impacts the present value of returns
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