Investment Management Question Bank Three Units

The Investment Management Question Bank is a meticulously crafted resource designed to enhance the learning experience for students in the field of investment management. This comprehensive question bank covers a wide range of topics, including the meaning and process of investment management, types of investments, risk and return, bond features, and equity share valuation. It is structured to include two-mark, four-mark, and six-mark questions at various cognitive levels such as remember, understand, analyze, apply, create, and evaluate.

The question bank aims to foster a deeper understanding of key concepts, promote critical thinking, and prepare students for exams by providing a diverse set of questions. By engaging with these questions, students can reinforce their knowledge, identify areas needing further study, and develop the analytical skills necessary for successful investment decision-making. This resource serves as an essential tool for both self-assessment and instructor-led evaluations.

1. Prepared by Dr D Santhanakrishnan, Associate Professor & Head, B.Com PA, Sri Ramakrishna College
of Arts & Science, Coimbatore 641006.
Investment Management Question Bank
UNIT I 12 HOURS
Introduction
Investment – Meaning and Process of Investment Management – Speculation –
Gambling, Difference between Speculation, Gambling and Investment – Type of
Investors - Factors influencing the investment choice - Investment Avenues in India.

2 Mark Questions:
Understand Level (6 Questions)
1. Explain the difference between investment and speculation.
2. How does gambling differ from investment?
3. Describe the characteristics of a conservative investor.
4. What are the primary factors influencing an investor's choice?
5. Compare and contrast equity shares and mutual funds as investment avenues in
India.
6. Discuss the role of risk tolerance in the investment decision-making process.
Remember Level (6 Questions)
1. Define investment.
2. What is speculation?
3. List three types of investors.
4. Name two investment avenues available in India.
5. What is the primary goal of gambling?
6. Identify one key factor that influences investment choices.

Four Mark Questions

Remember and Understand Level (6 Questions)

1. Remember: Define the term "investment" and explain its main objectives.
2. Understand: Differentiate between speculation and gambling.
3. Remember: List and describe the different types of investors.
4. Understand: Explain the primary factors that influence an investor's choice.
5. Remember: Identify and describe at least three investment avenues available in
India.
6. Understand: Discuss the differences between conservative and aggressive
investors.

2. Prepared by Dr D Santhanakrishnan, Associate Professor & Head, B.Com PA, Sri Ramakrishna College
of Arts & Science, Coimbatore 641006.
Analyze, Apply, Create, and Evaluate Level (4 Questions)

1. Analyze: Compare and contrast the risks and returns associated with different
types of investors.
2. Apply: Given a set of investment avenues, determine which would be most
suitable for a conservative investor and justify your choice.
3. Create: Design a basic investment portfolio for a new investor, considering
different investment avenues in India.
4. Evaluate: Assess the impact of market conditions on the investment choices of a
speculative investor.

Six Mark Questions

Remember and Understand Level (6 Questions)

1. Remember: Define speculation and explain its key characteristics.
2. Understand: Describe the process of investment management.
3. Remember: Identify and explain the major factors influencing investment choices
in India.
4. Understand: Discuss the differences between investment and speculation with
suitable examples.
5. Remember: List the various investment avenues in India and describe their
characteristics.
6. Understand: Explain how risk tolerance affects an investor's decision-making
process.

Analyze, Apply, Create, and Evaluate Level (4 Questions)

1. Analyze: Evaluate the benefits and drawbacks of investing in equity shares
versus mutual funds.
2. Apply: Apply the concept of risk-return tradeoff to different types of investment
avenues and provide examples.
3. Create: Create an investment plan for a young professional looking to invest in
the Indian market, considering factors such as risk tolerance and investment goals.
4. Evaluate: Critically evaluate the role of government policies in shaping
investment choices in India.

3. Prepared by Dr D Santhanakrishnan, Associate Professor & Head, B.Com PA, Sri Ramakrishna College
of Arts & Science, Coimbatore 641006.
UNIT II 12 HOURS
Risk and Return
Risk: Definition - Systematic versus Non-systematic Risk - Measurement of Risk -
Risk and Expected Return - Risk-Return Relationship of different stock - Portfolio
and Security Returns - Return and Risk of Portfolio - Portfolio Diversification and
Risk.

Two Mark Questions

Understand Level (6 Questions)

1. Explain the concept of systematic risk with an example.
2. How does non-systematic risk differ from systematic risk?
3. Describe the risk-return relationship for stocks.
4. What is meant by portfolio diversification?
5. Explain the term 'expected return' in the context of investments.
6. How is risk measured in investment management?

Remember Level (6 Questions)
1. Define risk in investment.
2. What is systematic risk?
3. List two examples of non-systematic risk.
4. Name one method of measuring risk.
5. Define portfolio return.
6. What is meant by 'return' in investments?

Four Mark Questions

Remember and Understand Level (6 Questions)

1. Remember: Define risk in the context of investments.
2. Understand: Differentiate between systematic and non-systematic risk.
3. Remember: List the methods used for measuring risk.
4. Understand: Explain the concept of risk and expected return.
5. Remember: Identify the components of portfolio returns.
6. Understand: Discuss the relationship between risk and return for different
stocks.

Analyze, Apply, Create, and Evaluate Level (4 Questions)

1. Analyze: Compare and contrast the risk-return relationship of two different
stocks.
2. Apply: Given a set of portfolio returns, calculate the overall return and risk of the
portfolio.
3. Create: Design a diversified investment portfolio to minimize risk.

4. Prepared by Dr D Santhanakrishnan, Associate Professor & Head, B.Com PA, Sri Ramakrishna College
of Arts & Science, Coimbatore 641006.
4. Evaluate: Assess the effectiveness of portfolio diversification in reducing risk.

Six Mark Questions

Remember and Understand Level (6 Questions)

1. Remember: Define systematic risk and provide examples.
2. Understand: Explain how non-systematic risk can be managed.
3. Remember: Identify and describe the tools used for measuring investment risk.
4. Understand: Discuss the concept of risk-return tradeoff with examples.
5. Remember: List and explain the different factors affecting portfolio and security
returns.
6. Understand: Describe the process of calculating the risk and return of a
portfolio.

Analyze, Apply, Create, and Evaluate Level (4 Questions)

1. Analyze: Evaluate the impact of diversification on the risk and return of a
portfolio.
2. Apply: Apply the concept of risk and expected return to a real-life investment
scenario.
3. Create: Create a hypothetical investment strategy that balances risk and return.
4. Evaluate: Critically analyze the effectiveness of different risk measurement
techniques in predicting investment performance.

5. Prepared by Dr D Santhanakrishnan, Associate Professor & Head, B.Com PA, Sri Ramakrishna College
of Arts & Science, Coimbatore 641006.
UnitIII
Security Valuation
Bond: Introduction – Reasons for issuing Bonds – Bond Features – Types of Bonds –
Determinants of bond safety -Bonds Prices, Measuring Price Volatility of Bonds -
Preference Shares: Introduction – Features of Preference shares – Preference Shares
Yield – Holding Period Return – Yield to Call - Concept of Present Value - Equity Share
Valuation Model.
Two Mark Questions

Understand Level (6 Questions)

1. Explain the primary reasons for issuing bonds.
2. Describe the main features of bonds.
3. What are the key determinants of bond safety?
4. Explain how bond prices are determined.
5. Describe the features of preference shares.
6. What is meant by yield to call in the context of preference shares?

Remember Level (6 Questions)

1. Define a bond.
2. List two types of bonds.
3. What is bond price volatility?
4. Define preference shares.
5. What is holding period return?
6. Explain the concept of present value.

Four Mark Questions

Remember and Understand Level (6 Questions)
1. Remember: Define bonds and explain their importance in financial markets.
2. Understand: Discuss the different types of bonds available to investors.
3. Remember: List and explain the features of preference shares.
4. Understand: Describe the concept of bond price volatility and its significance.
5. Remember: Identify and explain the main features of bonds.
6. Understand: Discuss the determinants of bond safety.

Analyze, Apply, Create, and Evaluate Level (4 Questions)

1. Analyze: Compare and contrast the yield of preference shares and bonds.
2. Apply: Calculate the holding period return for a given preference share.
3. Create: Develop a simple equity share valuation model.
4. Evaluate: Assess the impact of interest rate changes on bond prices.

6. Prepared by Dr D Santhanakrishnan, Associate Professor & Head, B.Com PA, Sri Ramakrishna College
of Arts & Science, Coimbatore 641006.


Six Mark Questions for "Bond and Preference Shares"

Remember and Understand Level (6 Questions)

1. Remember: Define bond yield and explain its components.
2. Understand: Describe the reasons for issuing bonds and their impact on a
company's financial structure.
3. Remember: Explain the concept of present value and its importance in bond
valuation.
4. Understand: Discuss the features of preference shares and their advantages to
investors.
5. Remember: Define yield to call and explain its relevance to preference shares.
6. Understand: Explain the determinants of bond safety and how they affect
investment decisions.

Analyze, Apply, Create, and Evaluate Level (4 Questions)

1. Analyze: Evaluate the relationship between bond prices and interest rates.
2. Apply: Apply the present value concept to determine the price of a bond.
3. Create: Construct a valuation model for equity shares based on dividend
discount methods.
4. Evaluate: Critically assess the factors affecting the price volatility of bonds and
how investors can manage this risk.