SEC Sri Lanka Certificate in Capital Markets Exam Questions and Answers
Question 1. A company reports net income of LKR50,000,000.00, preferred dividends of LKR3,000,000.00, and 8
million weighted-average common shares. What is basic EPS using these figures?
A. LKR6.25
B. LKR6.62
C. LKR0.16
D. LKR5.88
Correct Answer: D. LKR5.88
Explanation: Basic EPS allocates earnings available to common shareholders across the weighted-average common shares
outstanding. Subtracting preferred dividends leaves LKR47,000,000.00, and dividing by 8 million shares gives LKR5.88. Using total
net income without the preferred-dividend adjustment would overstate earnings attributable to common shares.
Question 2. A LKR1,000.00 face-value bond pays a 5.0% annual coupon in 4 equal payment(s) per year. What is
each coupon payment?
A. LKR50.00
B. LKR25.00
C. LKR250.00
D. LKR12.50
Correct Answer: D. LKR12.50
Explanation: Annual coupon interest is face value multiplied by the annual coupon rate, which equals LKR50.00. Dividing that
amount by 4 payment period(s) gives LKR12.50 per payment. The bond's market price is irrelevant to the contractual coupon cash
flow unless the question specifically asks for a yield measure.
Question 3. Currency A is quoted at 0.7677 units of Currency B per A, and Currency B is quoted at 160.67 units of
Currency C per B. What is the implied Currency C per Currency A cross rate?
A. 0.0048 units of Currency C per Currency A
B. 161.44 units of Currency C per Currency A
C. 123.35 units of Currency C per Currency A
D. 209.29 units of Currency C per Currency A
Correct Answer: C. 123.35 units of Currency C per Currency A
Explanation: When the quotation units align, multiply the two exchange rates so that Currency B cancels. 0.7677 B/A × 160.67 C/B
= 123.35 C/A. Dividing instead of multiplying would leave the unit conversion inconsistent with the requested quotation.
Question 4. A candidate preparing for SEC Sri Lanka Certificate in Capital Markets encounters the following
description: “Annual coupon interest divided by the bond's current market price.” Which term is most directly
associated with this description?
A. Treasury bill
B. Coupon bond
C. Current yield
D. Yield to maturity
Correct Answer: C. Current yield
Explanation: Current yield is best understood as annual coupon interest divided by the bond's current market price. This
interpretation is consistent with the way the concept is applied in professional securities and investment practice, including activity
overseen by Securities and Exchange Commission of Sri Lanka. The other choices describe different concepts or would lead to a
materially different risk, trading, valuation, or compliance conclusion.
Page 1
,Question 5. An investor buys a share for LKR100.00 and also buys a put with strike LKR85.00 for LKR5.00.
Ignoring costs and dividends, what is the maximum loss per share at expiration?
A. LKR20.00
B. LKR80.00
C. LKR15.00
D. LKR5.00
Correct Answer: A. LKR20.00
Explanation: The protective put establishes a minimum sale value equal to the put strike at expiration. Maximum loss is stock cost
plus put premium minus strike: 100 + 5 - 85 = LKR20.00. The premium is part of the cost of protection and therefore increases the
maximum loss relative to stock price minus strike alone.
Question 6. A bond has a face value of LKR1,000.00, an annual coupon rate of 7.0%, and a market price of
LKR1,120.00. What is its current yield?
A. -10.71%
B. 6.25%
C. 8.00%
D. 7.00%
Correct Answer: B. 6.25%
Explanation: Current yield equals annual coupon cash flow divided by current market price, so the numerator is LKR70.00.
Dividing by LKR1,120.00 gives 6.25%. Current yield is not the coupon rate and it is not yield to maturity because it ignores the
timing and amount of the redemption cash flow.
Question 7. A repo has cash principal of LKR2,000,000.00, an annual repo rate of 5.0%, and a term of 7 days on an
assumed 360-day basis. What is the repo interest?
A. LKR2,001,944.44
B. LKR1,944.44
C. LKR100,000.00
D. LKR1,917.81
Correct Answer: B. LKR1,944.44
Explanation: Simple repo interest on the stated convention is principal × annual rate × days / day-count basis. Using 7/360 gives
interest of LKR1,944.44. The repurchase amount would normally include both principal and interest, but the question asks for the
interest component only.
Question 8. A company reports net income of LKR50,000,000.00, preferred dividends of LKR1,000,000.00, and 10
million weighted-average common shares. What is basic EPS using these figures?
A. LKR5.00
B. LKR0.20
C. LKR5.10
D. LKR4.90
Correct Answer: D. LKR4.90
Explanation: Basic EPS allocates earnings available to common shareholders across the weighted-average common shares
outstanding. Subtracting preferred dividends leaves LKR49,000,000.00, and dividing by 10 million shares gives LKR4.90. Using
total net income without the preferred-dividend adjustment would overstate earnings attributable to common shares.
Page 2
,Question 9. A share trades at LKR40.00 and pays annual cash dividends of LKR1.50 per share. What is the
dividend yield based on the current price?
A. 3.75%
B. 1.50%
C. 96.25%
D. 26.67%
Correct Answer: A. 3.75%
Explanation: Dividend yield equals annual cash dividend per share divided by current market price per share. LKR1.50 / LKR40.00
× 100 = 3.75%. The calculation does not include capital gains or losses, so it is not a total-return measure.
Question 10. Which of the following best describes Primary market?
A. The difference between the best ask and the best bid, often reflecting liquidity and transaction cost.
B. The highest price a buyer is currently willing to pay for a security.
C. The market in which newly issued securities are sold by an issuer to investors.
D. A participant that stands ready to quote buy and sell prices and provide liquidity.
Correct Answer: C. The market in which newly issued securities are sold by an issuer to investors.
Explanation: Primary market is best understood as the market in which newly issued securities are sold by an issuer to investors.
This interpretation is consistent with the way the concept is applied in professional securities and investment practice, including
activity overseen by Securities and Exchange Commission of Sri Lanka. The other choices describe different concepts or would
lead to a materially different risk, trading, valuation, or compliance conclusion.
Question 11. An investor owns a share purchased at LKR60.00 and writes one call with strike LKR75.00, receiving
a premium of LKR3.00 per share. What is the maximum gain per share at expiration, ignoring dividends and costs?
A. LKR-12.00
B. LKR3.00
C. LKR15.00
D. LKR18.00
Correct Answer: D. LKR18.00
Explanation: A covered call's upside is capped because the written call can require sale of the share at the strike price. Maximum
gain per share is strike minus stock cost plus premium: 75 - 60 + 3 = LKR18.00. The premium adds income, but it does not remove
the downside risk of owning the stock.
Question 12. A trader takes a long futures position at 100.00. The contract multiplier is 50, and the position is
closed at 105.00. Ignoring fees and daily financing effects, what is the profit or loss per contract?
A. LKR5.00
B. LKR250.00
C. LKR-250.00
D. LKR350.00
Correct Answer: B. LKR250.00
Explanation: Futures profit or loss equals the price change multiplied by the contract multiplier, with the sign determined by
whether the position is long or short. For this long position, the result is LKR250.00. The contract's quoted price change alone is not
the cash profit or loss because the multiplier converts the quotation into contract value.
Page 3
, Question 13. A fund earns a gross return of 10.00% for a year and incurs annual expenses equal to 0.75% of
assets, with no other adjustments. What is the approximate net return?
A. Approximately 0.75%
B. Approximately 10.75%
C. Approximately 9.25%
D. Approximately 10.00%
Correct Answer: C. Approximately 9.25%
Explanation: Under the simplified assumptions, expenses reduce the gross return approximately one-for-one. 10.00% - 0.75% =
approximately 9.25%. Actual reported performance can differ because of timing, compounding, transaction costs, taxes, and the
precise method used to accrue expenses.
Question 14. A candidate preparing for SEC Sri Lanka Certificate in Capital Markets encounters the following
description: “An order that becomes executable after a specified trigger price is reached.” Which term is most
directly associated with this description?
A. Limit order
B. Stop order
C. Market order
D. Margin
Correct Answer: B. Stop order
Explanation: Stop order is best understood as an order that becomes executable after a specified trigger price is reached. This
interpretation is consistent with the way the concept is applied in professional securities and investment practice, including activity
overseen by Securities and Exchange Commission of Sri Lanka. The other choices describe different concepts or would lead to a
materially different risk, trading, valuation, or compliance conclusion.
Question 15. Using CAPM, what required return is implied by a risk-free rate of 4.0%, a market return of 8.0%, and a
beta of 0.7?
A. 6.80%
B. 8.00%
C. 12.00%
D. 5.60%
Correct Answer: A. 6.80%
Explanation: CAPM estimates required return as the risk-free rate plus beta multiplied by the market risk premium. The calculation
is 4.0% + 0.7 × (8.0% - 4.0%) = 6.80%. The beta applies to the market risk premium, not to the entire expected market return.
Question 16. In the context of Colombo Stock Exchange and Sri Lankan capital markets, which statement about
Money laundering is most accurate?
A. The process of disguising the illicit origin or ownership of criminal proceeds.
B. A person whose prominent public function may create heightened corruption or bribery risk requiring enhanced scrutiny where
applicable.
C. Risk-based identification, verification, and understanding of a customer's identity, activities, and relevant ownership or control.
D. Escalating and reporting transactions or behavior that meet applicable suspicion thresholds to the appropriate authority or
function.
Correct Answer: A. The process of disguising the illicit origin or ownership of criminal proceeds.
Explanation: Money laundering is best understood as the process of disguising the illicit origin or ownership of criminal proceeds.
This interpretation is consistent with the way the concept is applied in professional securities and investment practice, including
activity overseen by Securities and Exchange Commission of Sri Lanka. The other choices describe different concepts or would
lead to a materially different risk, trading, valuation, or compliance conclusion.
Page 4
Question 1. A company reports net income of LKR50,000,000.00, preferred dividends of LKR3,000,000.00, and 8
million weighted-average common shares. What is basic EPS using these figures?
A. LKR6.25
B. LKR6.62
C. LKR0.16
D. LKR5.88
Correct Answer: D. LKR5.88
Explanation: Basic EPS allocates earnings available to common shareholders across the weighted-average common shares
outstanding. Subtracting preferred dividends leaves LKR47,000,000.00, and dividing by 8 million shares gives LKR5.88. Using total
net income without the preferred-dividend adjustment would overstate earnings attributable to common shares.
Question 2. A LKR1,000.00 face-value bond pays a 5.0% annual coupon in 4 equal payment(s) per year. What is
each coupon payment?
A. LKR50.00
B. LKR25.00
C. LKR250.00
D. LKR12.50
Correct Answer: D. LKR12.50
Explanation: Annual coupon interest is face value multiplied by the annual coupon rate, which equals LKR50.00. Dividing that
amount by 4 payment period(s) gives LKR12.50 per payment. The bond's market price is irrelevant to the contractual coupon cash
flow unless the question specifically asks for a yield measure.
Question 3. Currency A is quoted at 0.7677 units of Currency B per A, and Currency B is quoted at 160.67 units of
Currency C per B. What is the implied Currency C per Currency A cross rate?
A. 0.0048 units of Currency C per Currency A
B. 161.44 units of Currency C per Currency A
C. 123.35 units of Currency C per Currency A
D. 209.29 units of Currency C per Currency A
Correct Answer: C. 123.35 units of Currency C per Currency A
Explanation: When the quotation units align, multiply the two exchange rates so that Currency B cancels. 0.7677 B/A × 160.67 C/B
= 123.35 C/A. Dividing instead of multiplying would leave the unit conversion inconsistent with the requested quotation.
Question 4. A candidate preparing for SEC Sri Lanka Certificate in Capital Markets encounters the following
description: “Annual coupon interest divided by the bond's current market price.” Which term is most directly
associated with this description?
A. Treasury bill
B. Coupon bond
C. Current yield
D. Yield to maturity
Correct Answer: C. Current yield
Explanation: Current yield is best understood as annual coupon interest divided by the bond's current market price. This
interpretation is consistent with the way the concept is applied in professional securities and investment practice, including activity
overseen by Securities and Exchange Commission of Sri Lanka. The other choices describe different concepts or would lead to a
materially different risk, trading, valuation, or compliance conclusion.
Page 1
,Question 5. An investor buys a share for LKR100.00 and also buys a put with strike LKR85.00 for LKR5.00.
Ignoring costs and dividends, what is the maximum loss per share at expiration?
A. LKR20.00
B. LKR80.00
C. LKR15.00
D. LKR5.00
Correct Answer: A. LKR20.00
Explanation: The protective put establishes a minimum sale value equal to the put strike at expiration. Maximum loss is stock cost
plus put premium minus strike: 100 + 5 - 85 = LKR20.00. The premium is part of the cost of protection and therefore increases the
maximum loss relative to stock price minus strike alone.
Question 6. A bond has a face value of LKR1,000.00, an annual coupon rate of 7.0%, and a market price of
LKR1,120.00. What is its current yield?
A. -10.71%
B. 6.25%
C. 8.00%
D. 7.00%
Correct Answer: B. 6.25%
Explanation: Current yield equals annual coupon cash flow divided by current market price, so the numerator is LKR70.00.
Dividing by LKR1,120.00 gives 6.25%. Current yield is not the coupon rate and it is not yield to maturity because it ignores the
timing and amount of the redemption cash flow.
Question 7. A repo has cash principal of LKR2,000,000.00, an annual repo rate of 5.0%, and a term of 7 days on an
assumed 360-day basis. What is the repo interest?
A. LKR2,001,944.44
B. LKR1,944.44
C. LKR100,000.00
D. LKR1,917.81
Correct Answer: B. LKR1,944.44
Explanation: Simple repo interest on the stated convention is principal × annual rate × days / day-count basis. Using 7/360 gives
interest of LKR1,944.44. The repurchase amount would normally include both principal and interest, but the question asks for the
interest component only.
Question 8. A company reports net income of LKR50,000,000.00, preferred dividends of LKR1,000,000.00, and 10
million weighted-average common shares. What is basic EPS using these figures?
A. LKR5.00
B. LKR0.20
C. LKR5.10
D. LKR4.90
Correct Answer: D. LKR4.90
Explanation: Basic EPS allocates earnings available to common shareholders across the weighted-average common shares
outstanding. Subtracting preferred dividends leaves LKR49,000,000.00, and dividing by 10 million shares gives LKR4.90. Using
total net income without the preferred-dividend adjustment would overstate earnings attributable to common shares.
Page 2
,Question 9. A share trades at LKR40.00 and pays annual cash dividends of LKR1.50 per share. What is the
dividend yield based on the current price?
A. 3.75%
B. 1.50%
C. 96.25%
D. 26.67%
Correct Answer: A. 3.75%
Explanation: Dividend yield equals annual cash dividend per share divided by current market price per share. LKR1.50 / LKR40.00
× 100 = 3.75%. The calculation does not include capital gains or losses, so it is not a total-return measure.
Question 10. Which of the following best describes Primary market?
A. The difference between the best ask and the best bid, often reflecting liquidity and transaction cost.
B. The highest price a buyer is currently willing to pay for a security.
C. The market in which newly issued securities are sold by an issuer to investors.
D. A participant that stands ready to quote buy and sell prices and provide liquidity.
Correct Answer: C. The market in which newly issued securities are sold by an issuer to investors.
Explanation: Primary market is best understood as the market in which newly issued securities are sold by an issuer to investors.
This interpretation is consistent with the way the concept is applied in professional securities and investment practice, including
activity overseen by Securities and Exchange Commission of Sri Lanka. The other choices describe different concepts or would
lead to a materially different risk, trading, valuation, or compliance conclusion.
Question 11. An investor owns a share purchased at LKR60.00 and writes one call with strike LKR75.00, receiving
a premium of LKR3.00 per share. What is the maximum gain per share at expiration, ignoring dividends and costs?
A. LKR-12.00
B. LKR3.00
C. LKR15.00
D. LKR18.00
Correct Answer: D. LKR18.00
Explanation: A covered call's upside is capped because the written call can require sale of the share at the strike price. Maximum
gain per share is strike minus stock cost plus premium: 75 - 60 + 3 = LKR18.00. The premium adds income, but it does not remove
the downside risk of owning the stock.
Question 12. A trader takes a long futures position at 100.00. The contract multiplier is 50, and the position is
closed at 105.00. Ignoring fees and daily financing effects, what is the profit or loss per contract?
A. LKR5.00
B. LKR250.00
C. LKR-250.00
D. LKR350.00
Correct Answer: B. LKR250.00
Explanation: Futures profit or loss equals the price change multiplied by the contract multiplier, with the sign determined by
whether the position is long or short. For this long position, the result is LKR250.00. The contract's quoted price change alone is not
the cash profit or loss because the multiplier converts the quotation into contract value.
Page 3
, Question 13. A fund earns a gross return of 10.00% for a year and incurs annual expenses equal to 0.75% of
assets, with no other adjustments. What is the approximate net return?
A. Approximately 0.75%
B. Approximately 10.75%
C. Approximately 9.25%
D. Approximately 10.00%
Correct Answer: C. Approximately 9.25%
Explanation: Under the simplified assumptions, expenses reduce the gross return approximately one-for-one. 10.00% - 0.75% =
approximately 9.25%. Actual reported performance can differ because of timing, compounding, transaction costs, taxes, and the
precise method used to accrue expenses.
Question 14. A candidate preparing for SEC Sri Lanka Certificate in Capital Markets encounters the following
description: “An order that becomes executable after a specified trigger price is reached.” Which term is most
directly associated with this description?
A. Limit order
B. Stop order
C. Market order
D. Margin
Correct Answer: B. Stop order
Explanation: Stop order is best understood as an order that becomes executable after a specified trigger price is reached. This
interpretation is consistent with the way the concept is applied in professional securities and investment practice, including activity
overseen by Securities and Exchange Commission of Sri Lanka. The other choices describe different concepts or would lead to a
materially different risk, trading, valuation, or compliance conclusion.
Question 15. Using CAPM, what required return is implied by a risk-free rate of 4.0%, a market return of 8.0%, and a
beta of 0.7?
A. 6.80%
B. 8.00%
C. 12.00%
D. 5.60%
Correct Answer: A. 6.80%
Explanation: CAPM estimates required return as the risk-free rate plus beta multiplied by the market risk premium. The calculation
is 4.0% + 0.7 × (8.0% - 4.0%) = 6.80%. The beta applies to the market risk premium, not to the entire expected market return.
Question 16. In the context of Colombo Stock Exchange and Sri Lankan capital markets, which statement about
Money laundering is most accurate?
A. The process of disguising the illicit origin or ownership of criminal proceeds.
B. A person whose prominent public function may create heightened corruption or bribery risk requiring enhanced scrutiny where
applicable.
C. Risk-based identification, verification, and understanding of a customer's identity, activities, and relevant ownership or control.
D. Escalating and reporting transactions or behavior that meet applicable suspicion thresholds to the appropriate authority or
function.
Correct Answer: A. The process of disguising the illicit origin or ownership of criminal proceeds.
Explanation: Money laundering is best understood as the process of disguising the illicit origin or ownership of criminal proceeds.
This interpretation is consistent with the way the concept is applied in professional securities and investment practice, including
activity overseen by Securities and Exchange Commission of Sri Lanka. The other choices describe different concepts or would
lead to a materially different risk, trading, valuation, or compliance conclusion.
Page 4
