SAPM (security analysis and portfolio management) important questions
Q1) WHAT IS FINANCIAL MEANING OF INVESTMENT?
An investment is an asset or item acquired with the goal of generating income or
appreciation. Appreciation refers to an increase in the value of an asset over time. When an
individual purchases a good as an investment, the intent is not to consume the good but
rather to use it in the future to create wealth.
Q2) WHAT IS REPURCHASING AGREEMENT – REPO?
A repurchase agreement (repo) is a form of short-term borrowing for dealers
in government securities. In the case of a repo, a dealer sells government
securities to investors, usually on an overnight basis, and buys them back the
following day at a slightly higher price. That small difference in price is the
implicit overnight interest rate. Repos are typically used to raise short-
term capital. They are also a common tool of central bank open market
operations.
or the party selling the security and agreeing to repurchase it in the future, it is
a repo; for the party on the other end of the transaction, buying the security
and agreeing to sell in the future, it is a reverse repurchase agreement.
KEY TAKEAWAYS
A repurchase agreement, or 'repo', is a short-term agreement to sell
securities in order to buy them back at a slightly higher price.
The one selling the repo is effectively borrowing and the other party is
lending, since the lender is credited the implicit interest in the difference
in prices from initiation to repurchase.
Repos and reverse repos are thus used for short-term borrowing and
lending, often with a tenor of overnight to 48 hours.
The implicit interest rate on these agreements is known as the repo
rate, a proxy for the overnight risk-free rate.
Q3) DEFINE SECURITIES?
The term "security" refers to a fungible, negotiable financial instrument that
holds some type of monetary value. It represents an ownership position in a
publicly-traded corporation via stock; a creditor relationship with a
governmental body or a corporation represented by owning that entity's bond;
or rights to ownership as represented by an option.
, Q4) WHAT ARE THE FACTORS WHICH DIFFRENCIATE ONE INDEX TO
ANOTHER?
The main factors that differentiate one index from the other are given below: The number
of the component stocks The composition of the stocks The weights Base year. The number
of stocks in an index influences the behavior of the index.
Q5) STATE THE IMPORTANCE OF ECONOMIC ANALYSIS?
Economic analysis is a process whereby strengths and weaknesses of an
economy are analyzed. Economic analysis is important in order to understand
exact condition of an economy. It can cover a number of important economic
issues that keep cropping up within a particular economy, which is being
analyzed.
For the national economy, fundamental analysis might focus on economic data to assess
the present and future growth of the economy. To forecast future stock prices, fundamental
analysis combines economic, industry, and company analysis to derive a stock's current
fair value and forecast future value.
Q6) WHAT IS MEANT BY P/E RATIO?
The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that
measures its current share price relative to its per-share earnings (EPS). The
price-to-earnings ratio is also sometimes known as the price multiple or the
earnings multiple.
P/E ratios are used by investors and analysts to determine the relative value
of a company's shares in an apples-to-apples comparison. It can also be used
to compare a company against its own historical record or to compare
aggregate markets against one another or over time.
Q7) what is technical analysis?
Technical analysis is a trading discipline employed to evaluate investments and identify
trading opportunities by analyzing statistical trends gathered from trading activity, such as
price movement and volume. ... Technical analysis can be used on any security with
historical trading data.
For example, an investor or analyst could use technical analysis on a stock like Apple
(AAPL) - Get Report to decide if it is a buy or not in 2019. The standard chart above shows
Apple's price (the black pattern above) and trading volume (the red and green bars).
Q1) WHAT IS FINANCIAL MEANING OF INVESTMENT?
An investment is an asset or item acquired with the goal of generating income or
appreciation. Appreciation refers to an increase in the value of an asset over time. When an
individual purchases a good as an investment, the intent is not to consume the good but
rather to use it in the future to create wealth.
Q2) WHAT IS REPURCHASING AGREEMENT – REPO?
A repurchase agreement (repo) is a form of short-term borrowing for dealers
in government securities. In the case of a repo, a dealer sells government
securities to investors, usually on an overnight basis, and buys them back the
following day at a slightly higher price. That small difference in price is the
implicit overnight interest rate. Repos are typically used to raise short-
term capital. They are also a common tool of central bank open market
operations.
or the party selling the security and agreeing to repurchase it in the future, it is
a repo; for the party on the other end of the transaction, buying the security
and agreeing to sell in the future, it is a reverse repurchase agreement.
KEY TAKEAWAYS
A repurchase agreement, or 'repo', is a short-term agreement to sell
securities in order to buy them back at a slightly higher price.
The one selling the repo is effectively borrowing and the other party is
lending, since the lender is credited the implicit interest in the difference
in prices from initiation to repurchase.
Repos and reverse repos are thus used for short-term borrowing and
lending, often with a tenor of overnight to 48 hours.
The implicit interest rate on these agreements is known as the repo
rate, a proxy for the overnight risk-free rate.
Q3) DEFINE SECURITIES?
The term "security" refers to a fungible, negotiable financial instrument that
holds some type of monetary value. It represents an ownership position in a
publicly-traded corporation via stock; a creditor relationship with a
governmental body or a corporation represented by owning that entity's bond;
or rights to ownership as represented by an option.
, Q4) WHAT ARE THE FACTORS WHICH DIFFRENCIATE ONE INDEX TO
ANOTHER?
The main factors that differentiate one index from the other are given below: The number
of the component stocks The composition of the stocks The weights Base year. The number
of stocks in an index influences the behavior of the index.
Q5) STATE THE IMPORTANCE OF ECONOMIC ANALYSIS?
Economic analysis is a process whereby strengths and weaknesses of an
economy are analyzed. Economic analysis is important in order to understand
exact condition of an economy. It can cover a number of important economic
issues that keep cropping up within a particular economy, which is being
analyzed.
For the national economy, fundamental analysis might focus on economic data to assess
the present and future growth of the economy. To forecast future stock prices, fundamental
analysis combines economic, industry, and company analysis to derive a stock's current
fair value and forecast future value.
Q6) WHAT IS MEANT BY P/E RATIO?
The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that
measures its current share price relative to its per-share earnings (EPS). The
price-to-earnings ratio is also sometimes known as the price multiple or the
earnings multiple.
P/E ratios are used by investors and analysts to determine the relative value
of a company's shares in an apples-to-apples comparison. It can also be used
to compare a company against its own historical record or to compare
aggregate markets against one another or over time.
Q7) what is technical analysis?
Technical analysis is a trading discipline employed to evaluate investments and identify
trading opportunities by analyzing statistical trends gathered from trading activity, such as
price movement and volume. ... Technical analysis can be used on any security with
historical trading data.
For example, an investor or analyst could use technical analysis on a stock like Apple
(AAPL) - Get Report to decide if it is a buy or not in 2019. The standard chart above shows
Apple's price (the black pattern above) and trading volume (the red and green bars).
