Investment Advisor (Level 1) Free Demo Test 7

Explanation:

All three options (a, b, and c) are necessary for granting the certificate of registration under Portfolio Managers Regulations 2020.

a) The applicant must be a body corporate. b) The applicant needs the required infrastructure like office space, equipment, and manpower. c) The applicant must appoint a compliance officer.

All these conditions must be met for the certificate of registration to be granted.

Explanation:

Asset allocation refers to the strategic distribution of an investment portfolio among different asset classes such as stocks, bonds, and cash equivalents. This process aims to optimize risk and return by diversifying investments across various categories based on their characteristics, including risk, return potential, and correlation with one another. Therefore, asset allocation involves dividing funds into different asset classes to achieve a balanced and diversified portfolio

Explanation:

Category II Alternative Investment Funds (AIFs) are restricted from undertaking leverage or borrowing except to meet day-to-day operational requirements. This limitation is imposed to ensure that Category II AIFs do not excessively leverage their investments, which could amplify risks. Instead, any borrowing undertaken should be solely for operational needs, rather than for speculative or investment purposes.

Explanation:

Forwards are bilateral agreements where two parties agree to buy or sell an asset at a predetermined price on a specific future date. These contracts are customizable and typically traded over-the-counter (OTC), allowing parties to tailor the terms to their specific needs. Unlike futures, which are standardized contracts traded on exchanges, forwards offer more flexibility in terms of contract terms and settlement arrangements.

Explanation:

E(R_port) = (70% X 5%) + (30% X 12%) = 7.10%

Explanation:

Exchanges control the risk of default on obligations arising out of trading by imposing margins. Margins are funds that traders are required to deposit with the exchange as a security against potential losses. By requiring margins, exchanges ensure that traders have sufficient capital to cover their potential obligations, reducing the risk of default. This mechanism helps maintain market integrity and stability by mitigating the impact of defaults on counterparties and the overall financial system.

Explanation:

A power of attorney grants an individual the authority to act on behalf of another person in legal or financial matters. This authority can encompass a wide range of actions, including managing financial affairs, making legal decisions, or conducting transactions on behalf of the person granting the power of attorney. It is a legal document that outlines the scope and limitations of the authority delegated to the appointed individual, known as the attorney-in-fact or agent.

Explanation:

The value of a derivative security is derived from the value of an underlying asset or assets. Derivatives derive their value from the performance of underlying assets such as stocks, bonds, commodities, currencies, or market indices. Therefore, changes in the value of the underlying assets directly affect the value of the derivative security. This relationship forms the basis of derivatives trading and pricing.

Explanation:

=FV(4.5%,3,0,-10000)=Rs. 11,411.66

Explanation:

The top-down approach involves first scanning the macroeconomic scenario to identify promising industries. Once potential industries are identified, specific companies within those industries are selected for investment. This approach begins with a broad analysis of economic and market conditions before narrowing down to individual investment opportunities. In contrast, the bottom-up approach starts with analyzing individual companies and their fundamentals without considering broader economic factors initially.