Unit ko samjho · NISM Series V-D
Understanding Index
5 questions is unit mein
Sawaal aur jawaab English mein hain, kyunki NISM ka exam paper bhi English mein hota hai.
Is unit mein kya hai
- What is a principal use of a broad equity-market index for a diversified equity fund?
- A two-share index uses free-float market capitalisation. Company A has 100 lakh shares at ₹20 and a free-float factor of 0.40. Company B has 50 lakh shares at ₹40 and a free-float factor of 1.00. What is A’s index weight, rounded to two decimals? Assumptions: The supplied share counts and free-float factors are hypothetical. No other constituents exist.
- An index starts a period with weights of 60% in share A and 40% in share B. A rises 10% and B falls 5%. There are no dividends, corporate actions or rebalancing. What is the index return for the period? Assumptions: Opening weights are given. No dividends, corporate actions or rebalancing occur.
- Immediately before an order, the best bid is ₹99.90 and best ask is ₹100.10. For this exercise, the ideal price is their midpoint and buy-side impact cost equals (average execution price − ideal price) ÷ ideal price × 100. The buy order executes at an average ₹100.60. What is the impact cost? Assumptions: Use the midpoint and impact-cost definition expressly supplied. Fees are excluded.
- A price-weighted index contains two shares priced at ₹60 and ₹40. Its divisor is 1, so the index is 100. The first share undergoes a two-for-one split, halving its price to ₹30 with no economic value change. What new divisor preserves the index level at 100? Assumptions: The index is price-weighted and the split creates no economic price movement.
Zaroori ideas
Practice bank se · 1
What is a principal use of a broad equity-market index for a diversified equity fund?
An index aggregates the performance of a defined set of securities under stated rules. It can act as a benchmark, provided that its exposure is relevant to the fund’s mandate. Remember: A useful benchmark should represent the exposure being evaluated.
Hint An index summarises a specified market or segment.
V-D-079Practice bank se · 2
A two-share index uses free-float market capitalisation. Company A has 100 lakh shares at ₹20 and a free-float factor of 0.40. Company B has 50 lakh shares at ₹40 and a free-float factor of 1.00. What is A’s index weight, rounded to two decimals? Assumptions: The supplied share counts and free-float factors are hypothetical. No other constituents exist.
A’s free-float value is 100 × 20 × 0.40 = ₹800 lakh. B’s is 50 × 40 × 1.00 = ₹2,000 lakh, so A’s weight is 800 ÷ 2,800 = 28.57%. Remember: Free-float weighting uses investible market value, not total issued capital alone.
Hint Multiply shares, price and free-float factor before calculating each share of the total.
V-D-080Practice bank se · 3
An index starts a period with weights of 60% in share A and 40% in share B. A rises 10% and B falls 5%. There are no dividends, corporate actions or rebalancing. What is the index return for the period? Assumptions: Opening weights are given. No dividends, corporate actions or rebalancing occur.
The contribution from A is 0.60 × 10% = 6 percentage points. B contributes 0.40 × (−5%) = −2 percentage points, giving an index return of 4%. Remember: Use opening weights to compute a one-period weighted return.
Hint Each constituent contributes its opening weight multiplied by its return.
V-D-081Practice bank se · 4
Immediately before an order, the best bid is ₹99.90 and best ask is ₹100.10. For this exercise, the ideal price is their midpoint and buy-side impact cost equals (average execution price − ideal price) ÷ ideal price × 100. The buy order executes at an average ₹100.60. What is the impact cost? Assumptions: Use the midpoint and impact-cost definition expressly supplied. Fees are excluded.
The ideal midpoint is (99.90 + 100.10) ÷ 2 = ₹100. The buy-side is (100.60 − 100) ÷ 100 × 100 = 0.60%. Remember: Impact-cost calculations require an explicit reference price.
Hint First calculate the midpoint of ₹99.90 and ₹100.10.
V-D-082Practice bank se · 5
A price-weighted index contains two shares priced at ₹60 and ₹40. Its divisor is 1, so the index is 100. The first share undergoes a two-for-one split, halving its price to ₹30 with no economic value change. What new divisor preserves the index level at 100? Assumptions: The index is price-weighted and the split creates no economic price movement.
The new divisor is (₹30 + ₹40) ÷ 100 = 0.70. The adjustment prevents a mechanical share split from appearing as an economic loss in the index. Remember: Index maintenance must separate corporate-action mechanics from market returns.
Hint Solve (30 + 40) ÷ new divisor = 100.
V-D-083Impact cost is the difference between the price shown on screen and the price a trade is actually filled at.
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