Key Terms and Concepts:

1. Prime legislation governing companies in India

The Companies Act, 2013 (Previously the Companies Act, 1956): For all companies
SEBI Act and Regulations: For all listed companies
RBI Regulations (For all Banking & NBFC Companies and transactions involving FOREX)
* SEBI: Securities Exchange Board of India
* NBFC: Non-Banking Financial Companies
2. Types of Companies
Private
Public (Listed/Unlisted)
LLP (Limited Liability Partnerships)
OPC (One Person Company)
3. Current major stock exchanges
Bombay Stock Exchange (BSE)
National Stock Exchange (NSE)
Calcutta Stock Exchange
4. Trading window of Stock Exchanges
Pre-open trade session: 09:00 to 09:15
Trading window: 09:15 to 15:30 (Effectively 15:25)
5. Major stock Exchanges of the World:
New York Stock Exchange (NYSE): USA
NASDAQ: USA
Tokyo Stock Exchange: Japan
London Stock Exchange: UK
Shanghai Stock Exchange: China
Hong Kong Stock Exchange: Hong Kong, China
Toronto Stock Exchange: Canada
BM&F Bovespa: South America
Australian Stock Exchange
6. IPO: Initial Public Offerings
A company (First time) offering its shares to the public. Companies can raise equity capital with
the help of an IPO by issuing new shares to the public or the existing shareholders can sell their
shares to the public without raising any fresh capital.
7. FPO: Follow-on (Further) Public Offerings
Issuing of shares to investors by a public company that is already listed on an exchange

8. Current Dignitaries
Prime Minister: Narendra Modi
Minister of Finance: Arun Jaitley
Minister of Corporate Affairs: Arun Jaitley
Minister of Finance and Corporate Affairs (State): Arjun Ram Meghwal
RBI Governor: Urjit Patel
Finance Secretary: Ashok Lavasa
9.

Benchmark Rate:
Also called base interest rate, it is the minimum interest rate investors will demand for investing
in a non-Treasury security. It is also tied to the yield to maturity offered on the comparablematurity treasury security that was most recently issued.
LIBOR:
LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate that some of the world's
leading banks charge each other for short-term loans. It stands for Intercontinental Exchange
London Interbank Offered Rate and serves as the first step to calculating interest rates on various
loans throughout the world.
(Simply, average interest rate estimated by leading banks in London that they would be paying if
they borrow from other banks)
MIBOR:
MIBOR is the interest rate at which banks can borrow funds, in marketable size, from other banks
in the Indian interbank market. MIBOR is calculated everyday by the National Stock Exchange
of India (NSEIL) as a weighted average of lending rates of a group of banks, on funds lent to
first-class borrowers.

10. MCQs on financial markets

11. Near-Money; (a) is as liquid as currency. (b) can be used as a medium of exchange. (c) serves
only store of value function of money
12. Zero coupon bond is a (a) discount bond. (b) coupon bond. (c) None of the above
13. Return on a bond (a) is yield to maturity of the bond. (b) is coupon payment of the bond. (c)
depends upon current price of the bond
14. Yield to maturity (a) is current price of a bond. (b) is coupon payment of a bond. (c) is related to
price of a bond.
15. Indexed bonds (a) carry fixed interest payments. (b) adjust coupon rates to changes in general
price level. (c) adjust face values to changes in general price level.
16. Call money (a) is borrowed by Non-banks from banks. (b) is unavailable in unorganized money
market. (c) is primarily lent by commercial banks.

17. Commercial Papers (a) are sold by the banks for short term purposes. (b) are like coupon bonds
which carry a fixed interest payment. (c) can develop a secondary market.
18. As a tool of monetary policy in India (a) CRR is more often used than SLR. (b) Bank Rate is
more often used than CRR. (c) open market operations are never used.
19. Scheduled banks (a) can only be public sector banks. (b) include RRBs. (c) do not include cooperative banks
20. For working capital, banks prefer (a) cash credits. (b) demand loans. (c) term loans.
21. You want to buy an ordinary annuity that will pay you $4,000 a year for the next 20 years. You
expect annual interest rates will be 8 percent over that time period. The maximum price you
would be willing to pay for the annuity is closest to
$32,000.

$39,272.

$40,000.

$80,000.

22. With continuous compounding at 10 percent for 30 years, the future value of an initial investment

of $2,000 is closest to
$34,898.

$40,171.

$164,500.

$328,282.

23. In 3 years you are to receive $5,000. If the interest rate were to suddenly increase, the present

value of that future amount to you would

fall.

rise.

remain unchanged.

cannot be determined without more information.

24. Assume that the interest rate is greater than zero. Which of the following cash-inflow streams

should you prefer?

Year1
Year2 Year3
Year4
$400
$300
$200
$100

$100

$200

$300

$400

$250

$250

$250

$250

Any of the above, since they each sum to $1,000.

25. You are considering investing in a zero-coupon bond that sells for $250. At maturity in 16 years it

will be redeemed for $1,000. What approximate annual rate of growth does this represent?
8 percent.

9 percent.

12 percent.

25 percent.

26. To increase a given present value, the discount rate should be adjusted

upward.

downward.

True.

Fred.

27. For $1,000 you can purchase a 5-year ordinary annuity that will pay you a yearly payment of

$263.80 for 5 years. The compound annual interest rate implied by this arrangement is closest to
8 percent.

9 percent.

10 percent.

11 percent.

28. You are considering borrowing $10,000 for 3 years at an annual interest rate of 6%. The loan

agreement calls for 3 equal payments, to be paid at the end of each of the next 3 years. (Payments
include both principal and interest.) The annual payment that will fully pay off (amortize) the
loan is closest to
$2,674.

$2,890.

$3,741.

$4,020.

29. When n = 1, this interest factor equals one for any positive rate of interest.

PVIF

FVIF

PVIFA

FVIFA

None of the above (you can't fool me!)

30. (1 + i)n

PVIF

FVIF

PVIFA

FVIFA

31. You can use

to roughly estimate how many years a given sum of money must earn at a
given compound annual interest rate in order to double that initial amount .
Rule 415

the Rule of 72

the Rule of 78

Rule 144

32. In a typical loan amortization schedule, the dollar amount of interest paid each period

increases with each payment

decreases with each payment

remains constant with each payment

33. In a typical loan amortization schedule, the total dollar amount of money paid each period

increases with each payment

decreases with each payment

remains constant with each payment

34. A project whose cash flows are more than capital invested for rate of return then net present value
will be
A . positive
B. Independent
C. Negative
D. Zero
35. In mutually exclusive projects, project which is selected for comparison with others must have
A. higher net present value
B. lower net present value
C. zero net present value
D. all of above
36. In capital budgeting, a negative net present value results in
A. zero economic value added
B. percent economic value added
C. negative economic value added
D. positive economic value added
37. Situation in which one project is accepted while rejecting an other project in comparison is
classified as
A. present value consent
B. mutually exclusive
C. mutual project
D. mutual consent
38. . Sum of discounted cash flows is best defined as
A. technical equity
B. defined future value

C. project net present value

D. equity net present value
39. Difference between consolidated and standalone balance sheet. Atleast prepare 5 points.
40. What is financial leverage and operational leverage?
41. What is the ideal range for debt equity ratio and why?
42. What is the significance of ROE and ROCE?
43. What is the difference between coupon rate and yield to maturity?
44. How is yield to maturity related to IRR?
45. What are the factors affecting change in issue price of a bond and how?
46. How to reduce the operating cycle?
47. What are the advantages of a shorter operating cycle? Does it affect total cost and profitability?