0801 fm (cfa550)_norestriction

8/8/2019 0801 FM (CFA550)_NoRestriction

1/24

1

Question PaperFinancial Markets (CFA550): January 2008

Answer all 76 questions. Marks are indicated against each question.

Total Marks : 100

1. The required amount of successful bids by a primary dealer who participated in the bidding forT-Bills is Rs.600 crore. The commitment to aggregative bidding would be

(a) Rs.1,200 crore(b) Rs.1,500 crore(c) Rs.1,600 crore(d) Rs.1,800 crore(e) Rs.2,000 crore. (1 mark)

2. Which of the following statements is/are true with respect to Public Deposits?

I. A company for meeting its short-term requirements of funds, may accept or renew deposits for less than 3months.

II. Any unsecured loan brought in by promoters in pursuance to any stipulation by financial institutions isconsidered as public deposit.

III. Any deposit repayable on demand or on notice can be accepted by a company.

IV. The maximum maturity period for the deposits cannot exceed 60 months.

(a) Only (I) above(b) Only (III) above(c) Both (I) and (IV) above(d) Both (II) and (III) above(e) (I), (III) and (IV) above. (1 mark)

3. An investor invested in the deposit of a company at an interest rate of 10% p.a. for a period of 3 years. On theexpiry of 2nd year, he demands premature withdrawal of his deposit. The interest rate for 2-year maturity depositis 8.5% p.a. The interest rate payable to him on the said deposit would be

(a) 6.50% p.a.(b) 7.50% p.a.(c) 8.00% p.a(d) 9.00% p.a.(e) 10.00% p.a. (1 mark)

4. Which of the following statements is/are not true with respect to Government dated securities?

I. These securities are issued at discount.

II. These securities provide higher liquidity.

III. These instruments facilitate implementation of the fiscal policy of the government.

(a) Only (I) above(b) Only (III) above(c) Both (I) and (II) above(d) Both (II) and (III) above(e) All (I), (II) and (III) above. (1 mark)

5. Which of the following statements is/are true with respect to call rates?

I. In the money market call rates are quoted on the annualized basis.II. The rate of interest on call money is calculated on daily basis.III. Low call rates indicate tightness of liquidity in the financial system.IV. Call rate is influenced by forces of supply of and demand for funds.(a) Only (II) above(b) Only (IV) above(c) Both (I) and (II) above(d) (I), (II) and (IV) above(e) All (I), (II), (III) and (IV) above. (1 mark)


2/24

2

6. A 364-Day T-bill with face value of Rs.100 is trading in the market at annual yield of 7.34%. The purchase priceof T-bill is

(a) Rs.92.23(b) Rs.92.64(c) Rs.92.85(d) Rs.93.18(e) Rs.93.56. (1 mark)

7. Carbon Ltd. issued 1000 commercial papers maturing after10 months having the face value of Rs.1,00,000 atRs.98,500 each. The stamp duty payable by the company on such issue is

(a) Rs. 50,000(b) Rs.1,00,000(c) Rs.1,50,000(d) Rs.2,00,000(e) Rs.5,00,000. (1 mark)

8. Catholic Ltd. has accepted the public deposits of Rs.1,56,65,000 payable at the end of 27 months. It has theaggregate paid up capital and free reserves of Rs.10,00,00,000. The maximum amount of brokerage payable forsoliciting the above deposits is

(a) Rs.1,56,650(b) Rs.2,34,975(c) Rs.3,13,300(d) Rs.3,91,625(e) Rs.2,56,650. (1 mark)

9. Which of the following is not the characteristic of a perfect market?

(a) All the players in the market have all the information relating to the security(b) The flow of funds between the markets should be restricted by the Government regulations(c) The market price of security reflects all the available information(d) Transparency in the trading mechanism and shorter settlement periods are critical for low

transaction cost(e) All players in the market are price takers. (1 mark)

10.Which of the following is false with respect to the effects of Open Market Operations (OMO) conducted by theRBI?

(a) The open market purchase of gilts will ease the liquidity of banks

(b) If the interest rate structure is to be moved upwards, the prices of securities in the OMO can be setat higher levels thereby signaling an upward movements in interest rates

(c) The effort to cool the interest rate volatility through OMO may some times lead to aninterest differential loss to the RBI

(d) If the PLR is reduced, the CP rate may also come down(e) Cut in repo rates will result in increase in the call rates and also other term money rates. (1 mark)

11.Mr. Shah has deposited Rs.2,00,000 with Wicro Ltd. for two years at the rate of 12% p.a. If he wants towithdraw the entire amount at the beginning of 12th month, the amount that will be refunded by the company toMr. Shah as per Rule 8(1) of the Companies (Acceptance of Deposits) Rules, 1975, is

(a) Rs.2,24,000(b) Rs.2,22,333(c) Rs.2,20,000(d) Rs.2,18,333

(e) Rs.2,00,000. (1 mark)


3/24

3

12.Following is the list of various depositors and their deposits with the Lord Bank:

Name ofdepositor

Amount ofDeposits (Rs.)

Prashant 1,70,500

Prashant 1,24,000

Srinivas 1,00,500

Nandgopal 95,000

Kalyan 82,000Kalyan 90,000

The half-yearly insurance premium payable by the Lord Bank to insure this deposits as per DICGC guideline is

(a) Rs.141.75(b) Rs.200.50(c) Rs.246.50(d) Rs.283.50(e) Rs.298.50. (2marks)

13.Money Market Mutual Fund is a special category of Mutual Fund,

(a) Which provides higher returns to an investor as compared to debt funds(b) Which provides an investor the choice to invest for medium-term(c) Where safety level of the investment is high

(d) Where liquidity is inadequate(e) Which invests mainly in unrated paper to generate high returns. (1 mark)

14.Which of the following CDs carries both fixed and floating interest rates?

(a) Asian Dollar CD(b) Installment CD(c) Jumbo CD(d) Thrift CD(e) Yankee CD. (1 mark)

15.Which of the following statements is/are true with respect to an Asset Backed Commercial Paper?

I. The paper sells at a high risk premium.

II. Sometimes, an outside surety is also involved in the transaction.

III. An organization with low credit rating or no credit rating can also access finance through this paper.

(a) Only (I) above(b) Only (II) above(c) Only (III) above(d) Both (I) and (III) above(e) Both (II) and (III) above. (1 mark)

16.Consider the following data pertaining to J.M. Mutual Fund (Income plan):

Particulars Rs. in crore

Value of investments 4,169.04Receivables 325.76Accrued income 95.48Other current assets 1,146.46Liabilities 977.12Accrued expenses 225.84

Number of units outstandingEntry Load 320 crore2.5%

Mr. Prasad wants to purchase units of this scheme. The per unit price he has to pay is



4/24

4

17.An investor has written a naked put option, on a stock trading on NSE:

Option

TypeExpiring on

Strike

Price

(Rs.)

Option

Premium

per share

(Rs.)

No. of shares

per contract

Current Market

Price of stock

(Rs.)

Put 27th December 2007 320 8.00 1,100 323.90

The amount of margin to be deposited by the investor in his brokerage account is

(a) Rs.40,139(b) Rs.44,429(c) Rs.75,768(d) Rs.84,348(e) Rs.84,429. (2marks)

18.Which of the following is nottrue with respect to 364-Day T-Bills?

(a) The RBI does not discount these bills

(b) The RBI does not participate in the auction of these bills

(c) Auction of these bills takes place every fortnight

(d) The auction amount of a bill is conveyed 3 days before the date of auction

(e) The yield on these bills can be used as a benchmark for determining the interest rate of floating

rate bonds. (1 mark)

19.Financial assets equal financial liabilities, so real assets will be financed by savings, for this relationship to existwhich of the following assumptions should hold good?

I. There are no external borrowings in the system.

II. Financial liabilities include stock issued to the outsiders.

III. Surplus funds of an economic unit will neither be used to purchase a real asset will nor be lent to othereconomic units to buy real assets.

(a) Only (I) above(b) Only (II) above(c) Both (I) and (II) above(d) Both (II) and (III) above(e) All (I), (II) and (III) above. (1 mark)

20.Banks in an economy have been maintaining SLR in excess of statutory requirements. In such a scenario, whichof the situations given below will prevail?

I. An increase in SLR will not have a significant impact on the liquidity, prices and yields of the instruments.II. A decrease in SLR will not have a significant impact on the liquidity, prices and yields of the instruments.III. A decrease in SLR will bring down the prices of the instruments.(a) Only (I) above(b) Only (II) above(c) Both (I) and (II) above(d) Both (I) and (III) above(e) Both (II) and (III) above. (1 mark)

21.Manoj Enterprises is coming out with an issue of commercial paper of amount Rs.100 lakh with maturity of 8months. The brokerage payable by it shall be

(a) Rs.50,000(b) Rs.32,500(c) Rs.30,000(d) Rs.25,000(e) Rs.10,000. (1 mark)


5/24

5

22.Apart from ensuring appropriate liquidity, investors should also consider the risk present in the money marketinstruments. Which of the following is/are the risks associated with the money market instruments?

I. Market risk.II. Reinvestment risk.III. Default risk.IV. Currency risk.(a) Only (I) above(b) Only (III) above(c) Both (II) and (III) above(d) Both (II) and (IV) above(e) All (I), (II), (III) and (IV) above. (1 mark)

23.Which of the following is/are true with respect to commercial paper and certificate of deposits?

I. Both are issued by corporates.II. Both can be invested by individuals and corporates.III. Both can be bought back by the issuer.IV. A CP can be issued with a minimum size of Rs.5 lakhs and in multiples of Rs.1 lakh, whereas a CD can be

issued with a minimum size of Rs.5 lakhs and in multiples of Rs.5 lakhs.(a) Only (II) above(b) Only (IV) above(c) Both (II) and (IV) above(d) (II), (III) and (IV) above(e) All (I), (II), (III) and (IV) above. (1 mark)

24.Which of the following is not the objective of borrower?

(a) Minimum terms and conditions attached with the usage of funds(b) Satisfying the statutory reserve requirements and capital adequacy norms(c) Minimum lead time in obtaining the required funds(d) Minimum monitoring and interference(e) Low rates of interest. (1 mark)

25.Which of the following statements is true?

(a) Banks can issue CDs for a minimum period of one year to a maximum of 3 years(b) CDs are not subject to stamp duty(c) CDs can be transferred immediately after issue(d) Premature payment or loans against CDs by the issuer is allowed(e) CDs are not subject to usual reserve requirements. (1 mark)

26.Scout Ltd. is a Primary Dealer in the Government Securities. During the auction of Dated Securities, it has anagreement with the RBI for the underwriting commitment of 10% of the shortfall. The devolvement on ScoutLtd. is Rs.2.5 crore. The competitive bids accepted at cut-off price (including non-competitive bids) are Rs.1000crore. The amount notified for the bids is

(a) Rs. 800 crore(b) Rs. 900 crore(c) Rs.1,100 crore(d) Rs.1,200 crore(e) Rs.1,300 crore. (2marks)

27.Which of the following securities are eligible for Repo transaction?

I. Government of India bonds in demat form.

II. Treasury bills in demat form.III. PSU bonds in demat form.

(a) Only (I) above(b) Only (II) above(c) Only (III) above(d) Both (I) and (III) above(e) All (I), (II) and (III) above. (1 mark)


6/24

6

28.For public deposits the issuing company is required to maintain the liquid assets to the extent of a certainpercentage of the deposits maturing during the financial year ending 31 st March next. For this purpose, thepermitted investment(s) is/are

I. Deposits held with any Indian bank, free from any lien.II. Unencumbered securities of central or state government.III. Unencumbered securities approved by Indian Trust Act, 1882.IV. Unencumbered bonds issued by HDFC.

(a) Only (II) above(b) Only (III) above(c) Both (II) and (IV) above(d) (II), (III) and (IV) above(e) All (I), (II), (III) and (IV) above. (1 mark)

29.ABC Ltd. is a primary dealer dealing in Government Securities. The following are the details of its transactionsduring the last financial year:

Total purchases of T-bills : Rs.300 crore

Total sales of T-bills : Rs.230 crore

Average of month-end stock : Rs.55 crore

The turnover ratio of ABC Ltd. would be

(a) 9.64(b) 5.46

(c) 4.19(d) 1.27(e) 0.78. (1 mark)

30.A T-bill maturing in n days can be purchased from the market at the current price of Rs.94.64. On maturity, theannualized yield to the investor will be 5.68%. The T-bill matures in

(a) 14 days(b) 30 days(c) 91 days(d) 182 days(e) 364 days. (1 mark)

31.The following is the abstract from the books of the Paul Finance Company:

Rs. crore

Deposits held with Scheduled bank 10(free from lien or charge)

Unencumbered GOI securities 5

Unencumbered securities of Tamil Nadu State Government 5

Investment in rated paper of Corporates 5

Investment in gold 10

Public deposits maturing during next financial year are Rs.200 crore. To comply with the statutory requirementof maintaining liquid assets, the amount of additional money to be invested by Paul Finance Company before30th April is

(a) Rs.30 crore(b) Rs.20 crore(c) Rs.10 crore

(d) Rs. 5 crore(e) Nil. (2marks)


7/24

7

32.In Mumbai, the market rates are as under

Rs./ : 56.05/081 month : 06 / 082 months : 12 / 143 months : 22 / 24

If a bank requires an exchange margin of 2 paise, what should be the rate to be quoted to an importer who wantsto have an option delivery in the second month?

(a) Rs.56.15 / (b) Rs.56.17 / (c) Rs.56.19 / (d) Rs.56.22 / (e) Rs.56.24 / . (1 mark)

33.The bid-ask spread is seen to be _________ in the retail market than in the interbank market due to ______&_____ in the interbank market compare to retail market.

(a) Lower, higher volume, greater liquidity(b) Higher, higher volume, greater liquidity(c) Lower, lower volume, lower liquidity(d) Higher, lower volume, lower liquidity(e) Lower, higher volume, lower liquidity. (1 mark)

34.The following are the exchange rates quoted in New York:

HK$/US$ : 7.7891/93

DKr/US$ : 5.8517/19

The synthetic rates of DKr/HK$ are

(a) 11.9714/16(b) 11.8171/73(c) 0.8468/74(d) 0.8462/63(e) 0.7512/13. (2marks)

35.Which of the following foreign exchange transactions does not involve credit risk?

(a) Spot transaction(b) Forward

(c) Option forward contract(d) Futures contract(e) Swap deal. (1 mark)

36.A customer wants to sell a bill worth $100000 to a bank. The bill might mature any time during the secondmonth. The bank charges a margin of 0.5% and exchange rates are as follows.

Spot Rs./$ 39.70/39.74

Forward 1 month 15/10

2 month 20/15

The rate the bank is likely to quote to its customer is

(a) Rs.39.30/$(b) Rs.39.35/$(c) Rs.39.39/$(d) Rs.39.65/$(e) Rs.39.70/$. (2marks)


8/24

8

37.A customer wants to enter into a forward contract with the bank, maturing on September 29 for purchasingdollars from the bank.

In July, the quote forThe contract maturing on August 31 is SFr/$ 5.5879/85The contract maturing on October 31 is SFr/$ 5.5908/20Swap points for the contract between August and October are 29/35The rate to be charged by the bank to the customer is(a) SFr 5.5930/$(b) SFr 5.5925/$(c) SFr 5.5907/$(d) SFr 5.5902/$(e) SFr 5.5899/$. (1 mark)

38.Standard Jewellery Exports based in Mumbai, is a manufacturer of diamond and gemstone studded jewellery,received an export order worth Euro 200,000 from Germany on October 01, 2007. The company requested itsbanker to book a forward contract for Euro 200,000 with an option to deliver in December 2007. (Assuming thatthe dollar is delivered on the first day of the option period.)

On October 01, 2007, the following rates prevailed in the inter bank market for US dollars in Mumbai:

Rs/$ Spot 39.70/72

Forward 1 month 10/11 paise

2 month 20/21 paise

3 month 30/31 paise

On October 01, 2007, the exchange rates in Singapore market were:

Euro/$ Spot 0.7086/88

Forward 1 month 13/11

2 month 15/13

3 month 20/18

While quoting the rates, bank usually collects the exchange margin of 0.10%.

The forward rate quoted by the bank on October 01, 2007 was

(a) Rs.56.16/Euro(b) Rs.56.25/Euro(c) Rs.56.34/Euro(d) Rs.56.37/Euro(e) Rs.56.45/Euro. (3marks)

39.Khanna & Khanna have sold Euro against $ to a German Bank and accordingly, they have credited Euro to thebank but still German bank has to credit $ in the A/c of Khanna & Khanna. Which of the following risk(s) is/areapplicable to Khanna & Khanna?

I. Contract Risk.

II. Clean Risk.

III. Operational Risk.

IV. Settlement Risk.

(a) Only (I) above(b) Only (II) above(c) Both (I) and (II) above(d) Both (I) and (III) above(e) Both (II) and (IV) above. (1 mark)


9/24

9

40.An exporter enters into a 2 months forward contract with the bank to sell 1 million US dollars to the bank atcontract price of Rs.39.40/$. After one month, exporter asks the bank to take delivery. The spot rate on that dateis 39.20/25, with 1 month swap points 10/15. The bank will charge interest at the rate of 14% per annum. Thenet inflow to the exporter is

(a) Rs.39,247,567(b) Rs.39,247,867(c) Rs.39,248,150(d) Rs.39,297,567

(e) Rs.39,297,667. (3marks)

41.Which of the following situations results in profit to the dealer?

(a) Long on foreign currency and home currency appreciated(b) Short on foreign currency and foreign currency appreciated(c) Long on foreign currency and home currency depreciated(d) Short on foreign currency and home currency depreciated(e) Long on foreign currency and foreign currency depreciated. (1 mark)

42.The initial current market price of the stock is Rs.33 and warrant price is Rs.7. It is expected that there will be anincrease in stock price by 12.12% and warrant price by 28.57%. The stock-warrant ratio after increase in priceswill be

(a) 5.11(b) 4.71

(c) 4.11(d) 3.51(e) 2.71. (2marks)

43.Energy limited is planning to issue 12% debentures with warrants attached to it, and warrants can be exercisedonly if the debenture is surrendered, such warrants are reffered to as

(a) Wedding warrants(b) Puttable warrants(c) Naked warrants(d) Detachable warrants(e) Callable warrants. (1 mark)

44.If the issuer has option to redeem the convertible security for cash, common stock, subordinated notes, or for acombination of the three, it is called

(a) Protective put(b) subordinated put(c) Hard put(d) Convertible put(e) Soft put. (1 mark)

45.A convertible bond issued by Surana Textiles has par value of Rs.1,000 at a coupon rate of 10% with a maturityof 10 years. The YTM of such bonds in the market is 12% p.a. The shares of Surana Textiles are trading at Rs.17each. If the conversion rate is 50, the minimum price of the convertible bond is

(a) Rs. 37(b) Rs. 850(c) Rs. 887(d) Rs. 925(e) Rs. 1,850. (2marks)

46.A convertible bond issued by Rios Industries has par value of Rs.1000 with a coupon rate of 8% and maturity of

4 years. The shares of the company are trading at Rs.17 each. The dividend paid by the company on the shares isRe.0.9 per share. If the conversion rate is 45 and each bond of the company is trading at Rs.962, the pay backperiod is

(a) 3.758 years(b) 4.025 years(c) 4.978 years(d) 5.234 years(e) 5.965 years. (2marks)


10/24

10

47.Which of the following is/are true with respect to the Option Adjusted Duration (OAD)?

I. OAD is influenced by the ratio of price of non-callable bond to the price of callable bond.

II. OAD is directly dependent on price of call option.

III. Delta of the call option does not have any influence on OAD.

(a) Only (I) above(b) Only (II) above(c) Both (I) and (II) above

(d) Both (I) and (III) above(e) Both (II) and (III) above. (1 mark)

48.FRNs consisting of minimum and maximum coupons are referred to as

(a) Mismatch FRNs(b) Collared FRNs(c) Capped FRNs(d) Structured FRNs(e) Inverse FRNs. (1 mark)

49.The investment value of a convertible bond issued by Yash Industries is Rs.500. The shares of the company aretrading at Rs.15 each. If the conversion rate is 41 and each bond of the company is trading at Rs.663, thepremium over investment value of the bond is

(a) 12.24%(b) 15.63%(c) 21.12%(d) 24.59%(e) 32.62%. (2marks)

50.The investment value of a convertible bond issued by Zenon Industries is Rs.500. The shares of the company are tradingat Rs.15 each. If the conversion rate is 40 and each bond of the company is trading at Rs.665, the percentage changerequired in the price of stock to reach conversion parity price is

(a) 16.74%(b) 12.42%(c) 10.83%(d) 10.83%(e) 12.47%. (2marks)

51.Which of the following are true with respect to a puttable bond?

I. Investor acquires a right to exercise his option at the prevailing market price.

II. Puttable bond involves two transactions purchase of a non-puttable bond and sale of a put option on thebond.

III. Investor will exercise the put option, when the market yield is greater than the coupon rate on the bond.

IV. Price of the puttable bond is equal to the price of the non- puttable bond and price of the put option.

(a) Both (I) and (II) above(b) Both (III) and (IV) above(c) (I), (II) and (IV) above(d) (I), (III) and (IV) above(e) All (I), (II), (III) and (IV) above. (1 mark)

52.A convertible bond issued by Amit Industries has par value of Rs.1,000 with a coupon rate of 9% and maturity of 5 years.The shares of the company are trading at Rs.18 each. The dividend paid by the company on the shares is Rs.1 per share. Ifthe break-even period is 2.075 years and each bond of the company is trading at Rs.983, the conversion rate is

(a) 40(b) 45(c) 50(d) 55(e) 60. (2marks)


11/24

11

53.Which of the following are the characteristics of a future contract?

I. Future contracts are traded in an organized location known as exchange.

II. Terms are customized to suit the requirements of both the contracting parties.

III. Contracts are cleared by separate clearing house.

IV. Future contracts can be easily closed.

(a) Both (I) and (II) above

(b) Both (III) and (IV) above(c) (I), (II) and (III) above(d) (I), (II) and (IV) above(e) (I), (III) and (IV) above. (1 mark)

54.The backwardation in a futures market refers to a situation

I. When the futures prices are higher than cash prices.

II. When the futures prices are lower than cash prices.

III. When the basis is positive.

IV. When the basis is negative.

(a) Only (I) above(b) Only (II) above(c) Both (I) and (III) above(d) Both (I) and (IV) above(e) Both (II) and (III) above. (1 mark)

55.The average daily price change in coffee futures contract is Rs.2.50 per kg and the standard deviation of theprice changes is Re.0.50. If the size of the contract is 1,000 kg, the initial margin required is


56.In a forex market if an investor wants to hedge his forex payments and have minimum risk, which of thefollowing should the investor prefer?

(a) Sell the forex futures(b) Enter into a forward contract to purchase the required forex(c) Enter into a call option to purchase the required forex

(d) Buy the forex futures(e) Enter into a put option to sell the required forex. (1 mark)

57.The traders in a futures exchange, who tend to carry positions for longer period of time are known as

(a) Floor brokers(b) Dual traders(c) Scalpers(d) Hedgers(e) Position traders. (1 mark)

58.At the beginning of a trading day, Mr. Ravi Jain is in a long position in the futures market and his collateral isexactly at the required margin. If the closing futures price is above the opening price, what will happen at theend of the day?

(a) He will be subject to a margin call(b) His account will be marked to market and losses will be transferred out

(c) His account will be marked to market and gains will be transferred in(d) His losses will be offset by gains made by investors holding short positions(e) His losses will be carried forward to the next day. (1 mark)

59.An option writer writes a 6-m naked call option on a stock at a premium of Rs.3 and the strike price of Rs.150.The prevailing market price of the stock is Rs.130. If on the expiration day, the price of the stock is Rs.140, thenthe profit/loss to the option writer will be

(a) Rs.10(b) Rs. 3(c) Rs. 3(d) Rs.10(e) Rs.13. (2marks)


12/24

12

60.Other things being equal, call option premiums for a given asset tend to increase when

I. The price of the underlying asset decreases.II. The volatility of the returns on underlying asset decreases.III. The time to expiration of the option increases.IV. The exercise price of the option increases.(a) Only (I) above(b) Only (III) above

(c) Both (I) and (III) above(d) Both (II) and (IV) above(e) All (I), (II), (III) and (IV) above. (1 mark)

61.Which of the following statements are uses of stock market indices?

I. The growth in the secondary market can be measured through the movement of indices.II. The return on index is helpful in conducting the portfolio risk return evaluation.III. Indices can be calculated industry-wise to know their trend pattern.IV. Stock market indices are useful indicator of a countrys economic health.(a) Both (I) and (II) above(b) Both (I) and (IV) above(c) (I), (II) and (IV) above(d) (I), (III) and (IV) above(e) All (I), (II), (III) and (IV) above. (1 mark)

62.Which of the following statements is/are not true for OTCEI?

I. OTCEI was established to have faster transaction, greater liquidity in the market and a transparency intransactions.

II. Companies with an issued capital ranging from Rs.3 lakh to less than Rs.3 crore are eligible to list theirshares under OTCEI.

III. OTCEI is first screen-based trading exchange in India.IV. OTCEI permits trading of equity and debentures.(a) Only (II) above(b) Both (II) and (III) above(c) Both (III) and (IV) above(d) (I), (II) and (IV) above(e) (I), (III) and (IV) above. (1 mark)

63.Mr. Anand has given an order to his broker to decide whether to buy or sell the security and also the price. The

type of order given by Mr. Anand to his broker is

(a) Market order(b) Open order(c) Limit order(d) Discretionary order(e) Day order. (1 mark)

64.International Organization Of Securities Commission (IOSCO) functions through the committee system. Whichof the following committee looks after the day to day functioning of the organization and strives to attain theobjectives?

(a) Presidents committee(b) Executive committee(c) Technical committee(d) Emerging markets committee(e) SRO consultative committee. (1 mark)

65.Which of the following is/are true with respect to Beneficiary Owner account in commodity trading?

I. It is used for the purpose of settlement of delivery obligation.II. It is used for holding both securities and commodities.III. It is used for transacting in commodities.

(a) Only (I) above(b) Only (II) above(c) Only (III) above(d) Both (I) and (III) above(e) Both (II) and (III) above. (1 mark)


13/24

13

66.Which of the following is/are the part(s) of commodity markets?

I. Agricultural market.II. Metal market.III. Energy market.(a) Only (I) above(b) Only (II) above(c) Only (III) above(d) Both (I) and (II) above(e) All (I), (II) and (III) above. (1 mark)

67.Which of the following statements is/are true with respect to the valuation of real assets?

I. For a real asset which already exists, the application of cost approach is more suitable.II. For a property with same risk-return characteristics, application of income approach is more suitable.III. For a real asset which is to be brought and developed, the application of market approach is more suitable.(a) Only (I) above(b) Only (II) above(c) Only (III) above(d) Both (I) and (II) above(e) All (I), (II) and (III) above. (1 mark)

68.Which of the following is/are not the characteristics of real estate market?

I. In this market, each packet is unique.II. There are relatively fewer players in the market.

III. The price of property is not influential.IV. This market is subject to extensive Government controls.(a) Only (III) above(b) Only (IV) above(c) Both (I) and (IV) above(d) Both (II) and (III) above(e) (I), (II) and (IV) above. (1 mark)

69.The net operating income from the property is Rs. 35,000. The required rate of return is 14%. For next twoyears, the NOI is growing at a rate of 10% and after that it will grow at a constant rate of 5%. The market valueof the property is

(a) Rs.3,95,849(b) Rs.3,99,851(c) Rs.4,28,436

(d) Rs.4,31,242(e) Rs.4,46,540. (2marks)

70.Which of the following physical factors affect the value of real asset?

(a) Interest rates(b) Demography(c) Business cycle(d) Free hold(e) Inflation. (1 mark)


14/24

14

71.The following information is pertaining to the assets and liabilities of Reliance mutual fund:

Break up of assets of MF

Receivables : 4.36%

Accrued income : 3.82%

Other current assets : 19.13%

Investment : 72.69%

Break up of liabilities of MF

Liabilities : 14.92%

Accrued expenses : 3.44%

Unit holder claim : 81.64%

The accrued expenses and accrued income are Rs.45 crores and Rs.50 crores respectively. If the number ofoutstanding units is Rs.70 crores, the NAV per unit is


72.Which of the following reasons are true for the close-ended mutual fund for the current price being less than theNAV?

I. Investors doubt about the abilities of the funds management.II. Lack of sales effort.III. Riskiness of the fund.IV. Lack of marketability of the funds units.(a) Both (I) and (II) above(b) Both (III) and (IV) above(c) (I), (II) and (III) above(d) (I), (III) and (IV) above(e) All (I), (II), (III) and (IV) above. (1 mark)

73.The fund raised by Sun Mutual Fund under a scheme is Rs.550 crore. Its maximum initial issue expenses withrespect to that scheme can be

(a) Rs. 5.50 crore(b) Rs.16.50 crore(c) Rs.22.00 crore(d) Rs.27.50 crore(e) Rs.33.00 crore. (1 mark)

74.In case of pension funds, the amount by which the total assets of the company exceed the sum of its reserves iscalled as

(a) Property capital(b) Surplus capital(c) Solvency capital(d) Real capital(e) Actuarial capital. (1 mark)

75.60 years old, Mr. Sharma is a retired employee of Union bank and his pensionable year of service is 35 years.

His last 10 months average monthly salary is Rs.25,000. The monthly pension that he recieves under EmployeesPension Scheme (EPS) is



15/24

15

76.Andhra bank proposed to borrow on 11th December 2007 an amount of Rs.1 crore from Southern bank under

repo for a period of 14 days at an interest rate of 10% p.a. The security for this transaction is 7.5% CG2017. Thefollowing information is related to the security:

Interest payments : 1st January and 1st July

Current price of the security : Rs.99.81

The repurchase price of the security is

(a) Rs.99,90,189(b) Rs.99,91,395(c) Rs.99,91,403(d) Rs.99,91,801(e) Rs.99,92,801. (3marks)

E

N

D

O

F

Q

UE

S

T

I

O

N

P

A

P

E

R

Suggested AnswersFinancial Markets (CFA550): January 2008

Answer Reason1. B The minimum success ratio for the PDs should be 40% for T-Bills So commitment for aggregative

bidding would have been

= 600/0.40

= Rs. 1500 crore. Hence (b) is the answer.

< TOP

2. C A company for meeting its short-term requirements of funds, may accept or renew deposits forless than 3 months.

Any unsecured loan brought in by promoters in pursuance to any stipulation by financial institutionscan not consider as public deposits.

No deposit repayable on demand or on notice can be accepted by a company.

The maximum maturity period for the deposits cannot exceed 60 months.

Hence correct answer is (c).

< TOP


16/24

16

3. B Its 1% less than the rate at which the company would have paid if the deposit had been accepted forthe period for which the deposit had actually run. In this case it would be

= 8.5% - 1% = 7.5%. Hence (b) is the answer.

< TOP

4. A The government-dated securities are not issued at discount. They carry coupon rate.

All other statements are correct for to government-dated securities.

Hence (a) is the correct answer.

< TOP

5. D High call rates indicate a tightness of liquidity in the financial system. Therefore statement (III) isnot correct.

All other statements are correct for call rates.

Hence (d) is the correct answer.

< TOP

6. D Days Yield Face Value1

365 Pr ice

+ =

364 0.0734 100

1365 Pr ice

+ =

Price = Rs.93.18.


< TOP

7. D The stamp duty payable on CP for maturity 9 months 12 months = Rs.2 per Rs.1000 on the face

value of the CP. Hence Carbon Ltd. should pay stamp duty to the extent of 1,000*1,00,000*2/1000 =Rs.2,00,000.


< TOP

8. C Brokerage is 2% of the amount of public deposits raised if the tenure of the deposit is more than twoyears.

Brokerage = Rs.1,56,65,000*0.02

= Rs.3,13,300

Hence (c) is the correct answer.

< TOP

9. B Characteristics of perfect market:

All the players in the market have all the information relating to the security and the market price ofsecurity reflects all the available information

The flow of funds within the market and between the market should not be restricted by theGovernment regulations

Transaction cost will depend on trading and settlement processes

Transparency in the trading mechanism and shorter settlement periods

All players in the market are price takers.

Hence (b) is the correct answer.

< TOP

10. E The open market purchase of gilts will ease the liquidity of banks

If the interest rate structure is to be moved upwards, the prices of securities in the OMO can be set athigher levels thereby signaling an upward movements in interest rates

The effort to cool the interest rate volatility through OMO may some time lead to an interestdifferential loss to the RBI

IF the PLR is reduced , the CP rate may also come down

Cut in repo rates will result in bringing down the call rates and also other term money rates.

Hence (e) is the correct answer.

< TOP

11. D Mr. Shah is withdrawing his deposit at the beginning of the 12th month hence he will be given the

interest for 11 months. Now as per Rule 8(1) of the Companies (Acceptance of Deposits) Rules,1975 he will be given the interest at the rate of 10% because he is withdrawing the amount beforeone year.

Therefore the interest will be 2,00,000 * 0.10 *11/12 = 18,333 (approx)

Hence the total amount that is to be refunded is 2,00,000 + 18,333 = Rs.2,18,333


< TOP


17/24

17

12. A If a deposit held in a name of a person individually and the same depositor also holds a depositjointly with another person then they are treated as two different deposits.

Name of depositor Maximum amount insured

Prashant 1,00,000

Prashant 1,00,000

Srinivas 1,00,000

Nandgopal 95,000

Kalyan 82,000Kalyan 90,000

Total 5,67,000

Hence the insurance premium payable is 567000*0.025/100 = Rs.141.75

< TOP

13. C MMMFs are a special category of Mutual Funds, where returns are lower since liquidity levels arehigh. These provide an investor the choice to invest for short-term. These invest mainly in high ratedpaper so safety levels are quite high. Hence (c) is the correct choice.

< TOP

14. A Asian Dollar CDs carry both fixed and floating interest rates.

Hence (a) is the correct answer.

< TOP

15. E Asset Backed Commercial Paper sells at virtually no or very little risk premium. Sometimes, anoutside surety is also involved in the transaction. An organization with low credit rating or no credit

rating can also access finance through this paper. Hence statements (II) and (III) are true. Therefore(e) is the correct answer.

< TOP

16. B

Public offering price = eargchSales1

NAV

=

( )4169.04 325.76 95.48 1146.46 977.12 225.84 /3 20

(1 0.025)

+ + +

=

14.168

0.975 = Rs.14.53

< TOP

17. C Put option

The put option is out of the money

a. Using First Method

Margin = Option premium for 1100 shares + 0.2 Market price per share 1100

The amount by which the contract is out of money

= 8 1100 + 0.2 323.90 1100 (323.90 320) 1100

= Rs.75,768

b. Using Second Method

Margin = Option premium for 1100 shares + 0.1 stock market price 1100

= 8 1100 + 0.1 323.90 1100

= Rs.44,429.

As the amount arrived through the first method is higher hence the margin amount for putoption

= Rs. 75,768.

< TOP


18/24

18

18. D The following are true with respect to 364-Day T-Bills:

The RBI does not discount these billsThe RBI does not participate in the auction of these bills

Auction of these bills takes place every fortnight

The auction amount of a bill is not conveyed before the date of auction

The yield on these bills can be used as a benchmark for determining the interest rate of floatingbonds.


< TOP

19. C For this relationship to exist, There should be no external borrowings in the system and financialliabilities should include stock issued to the outsiders. Statement (III) is not correct. Hence (I) and(II) are true. Hence (c) is the correct answer

< TOP

20. C If banks are having excess securities, then increase/ decrease in SLR will not have any impact on theprice and yield of the instruments. Statements (I) and (II) are correct. Hence (c) is the correct answer.

< TOP

21. E Since the maturity of the instrument is 8 months. The total brokerage shall be as follows: 0.1% of the

issue amount = Rs.10,000. Hence (e) is the correct answer.

< TOP

22. E All are the risk associated with the money market instruments.

Hence (e) is the correct answer.

< TOP

23. A A CP can be issued by corporates but a CD can be issued only by banks and some permittedfinancial institutions. But individuals and corporates can invest in both. A CP can be bought backby issuer but a CD cannot be bought back by the issuer. A CD can be issued with a minimum size ofRs.1 lakhs and in multiples of Rs.1 lakh, whereas a CP can be issued with a minimum size of Rs.5lakhs and in multiples of Rs.5 lakhs. Hence (a) is the correct answer.

< TOP

24. B The borrowers generally consider the following while entering into a deal:

Low rates of interestMinimum lead time when money is required

Access to funds up to the desired period of time

Minimum terms and conditions attached with the usage of funds

Minimum monitoring and interference from the lender

Freedom to set the repayment schedule according to the convenience of the borrower.

Satisfying the statutory reserve requirements and the capital adequacy norms is the objective of thelender not the borrower.

Hence, option (b) is the correct answer.

< TOP


19/24

19

25. C Following are some guidelines relating to CDs:

Banks can issue CDs for a minimum period of 15 days to a maximum of one year, whereasA financial institution can issue it for a minimum of one year and a maximum of 3 years.

CDs are subjected to stamp duty.

CDs can be transferred immediately after issue.

Premature payment or loans against CDs by the issuer is not allowed.

All CDs are subjected to usual CRR and SLR requirements.

Hence, option (c) is the correct answer.

< TOP

26. C When Scout Ltd. accepted for 10% of short fall, its total devolvement accounted for Rs.2.5 crore.

Total devolvement on PDs = Rs.2.5 crore/0.10 = Rs.25 crore.

In case of dated securities, total devolvement on PDs is 25% of total short fall

Therefore, total short fall = Rs.25 crore/0.25 = Rs.100 crore

If the bids accepted at cut-off price are Rs.1000 crore, the amount notified is Rs.1100 crore,

(Rs.1000 crore + Rs.100 crore).Hence, option (c) is the correct answer.

< TOP

27. E All the mentioned securities are eligible for Repo transaction. Hence (e) is the correct answer. < TOP

28. D For public deposits the issuing company is required to maintain the liquid assets to the extent ofcertain percentage of the deposits maturing during the financial year ending 31st March next. For thispurpose, the permitted investments are

Deposits held with a schedule bank, free from any lien.

Unencumbered securities of central or state government.

Unencumbered securities approved by Indian trust act.

Unencumbered bonds issued by HDFC.

Hence (d) is the correct answer

< TOP

29. A The turnover ratio can be calculated as follows:

300 2309.64

55

+=

. Hence (a) is the answer.

< TOP

30. E The value of n can be calculated as follows:

*1

Pr 365

Facevalue Days Yield

ice= +

100 * 0.05681

94.64 365

Days= +

Therefore n= 364 days

< TOP

31. C It has to maintain 15% of the deposits maturing during 31st March of the next year in approvedsecurities. As deposits maturing during 31st March of the next year are Rs.200 crore, it has tomaintain Rs.30 crore worth of liquid assets. It has already invested Rs.20 crore in approvedsecurities. Gold and investment in corporate paper doesnt fall under approved securities. Hence itneeds to invest Rs.10crore more. Therefore (c) is the correct answer.

< TOP

32. E The forward margin is in premium. Premium for two months is collected assuming that the importertakes delivery of the currency at the end of 2nd month. Hence, 2 months premium 14 paise is added tothe ask rate of Rs. 56.08 and as the bank requires a 2 paise margin, margin is also added to ask rate.Hence, rate quoted is Rs. 56.24 ( 56.08 + 0.14 + 0.02)

< TOP


20/24

20

33. B The bid-ask spread is seen to be higher in the retail market than in interbank market. This is becauseof the higher volume and greater liquidity in the interbank market.

< TOP

34. EDKr

HK$ bid =

DKr(bid)

US$

1 15.8517 0.7512

HK$ / US$ (ask) 7.7893= =

( )DKr DKr 1 1

ask ask US$ bid 5.8519 0.7513HK$ US$ HK$ 7.7891

= = =

< TOP

35. D Future contract involves an agreement between two parties to buy/sell an asset at a predeterminedprice on a future date. In such contract the credit risk involved is minimized by the clearing house bybeing a counter party to all trades.

< TOP

36. A In this case, since the swap points are in descending order, we have to subtract from the spot rates toobtain the outright forward rates.

1 month forward : 39.55/39.64

2 month forward : 39.50/39.59

Since the delivery can take place any time during the second month, the bank will base its quote onthe more adverse of the one month and two month forward rates, as the bank has to buy $. When thecustomer sell $ to obtain Rupees, the most adverse rate the bank will quote for him is Rs.39.50/$

Subtracting a margin of 0.5%, the rate quoted by the bank will be (39.50)(1-.005)= Rs.39.30/$

< TOP

37. D On the ask side the premium is 35 points which is spread over (30+31) 61 days. The requiredmaturity is 29 days away from the august maturity. Hence the premium charged by the bank over andabove the August rate will be 35*29/61, i.e., 17 points. Hence the rate charged will be5.5885+.0017= SFr5.5902/$.

< TOP

38. C US dollar is at premium against rupee. Assuming that the dollar is delivered on the first day of theoption period, premium is to be taken for 2 months only

Rs /$ Spot bid rate 39.70

Add premium for 2 months 0.20

39.90

Less exchange margin at 0.10% 0.04

Forward buying rate for dollar 39.86

US dollar is at discount against euro. Since selling rate is to be considered earlier delivery ask rate

for 2 months is to be taken i.e. 0.7075(.7088-.0013)

Rate to be quoted for Euro =

39.86

0.7075

= Rs.56.34

< TOP

39. E Till the bank credits Dollars in Khanna & Khanna A/c, they will be running clean risk and if bankfails to do so, they have to put up with the loss. This type of risk also known as settlement risk, mayarise in international transactions owing to time-zone differences.

Hence (e) is correct answer.

< TOP

40. A The bank has to offset its position created by the early delivery, the bank will have to sell dollar spotat @ Rs.39.20 and will have to pay premium of 15paise for the swap. This cost of 15paise will becharged to the customer. Since the bank pays Rs.39.40/$ to exporter and receives Rs.39.20/$ fromthe market, there will be outlay of fund to the extent of 20paise per dollar for the duration of swap

i.e. 1 month the bank will charge 14% interest. In addition to swap cost and interest, exporter willhave to pay Rs.100 flat charges to the bank.

Inflow from dollar sale: 1,000,000*39.40 Rs.39,400,000

Swap charges paid: 0.15*1,000,000 150,000

Interest paid: 0.20*1,000,000*0.14/12 2333

Flat charges 100

Total outflow Rs.152,433

Net inflow Rs.39,247,567

< TOP


21/24

21

41. C Having receivables in a foreign currency is being long on foreign currency, when home currency isdepreciating result in profit to the dealer as he is going to get more amount of home currency againstforeign currency.

Hence (c) is correct answer.

< TOP

42. C Stock price after one month: 33*1.12112= Rs. 37

Warrant price after one month: 7*1.2857= Rs. 9

Stock warrant ratio =stock price/warrant price

= 37/9 = 4.11

Hence answer is (c).

< TOP

43. A The warrants which are attached to the host debentures and can be exercised only, if the hostdebenture is surrendered are referred as wedding warrants. Hence, alternative (a) is answer.

< TOP

44. E If the issuer has the option to redeem the convertible security for cash, common stock, subordinatednotes, or for a combination of the three, it is called soft put.

< TOP

45. C Intrinsic value of the bond =100 PVIFA (12%, 10) + 1000 PVIF (12%,10)

= 100 5.65 + 1000 0.322 = Rs.887

Convertible price of the bond = 50 Rs.17 = Rs.850

The greater of intrinsic value and convertible price = Rs.887 which is minimum price of the bond.

< TOP

46. C Conversion premium = (Market price of the bond Conversion value)/Conversion value= (9624517)/ 4517 = 25.75%

Current yield = 80/962 = 8.32%

Dividend yield = 0.9/17 = 5.29%

Pay back period = [%Premium/(1+%Premium)]/[Current Yield Dividend

Yield/(1+%Premium)] = 0.2575/(1.2575)/ (0.0832 0.0529/1.2575)) = 4.978 years

< TOP

47. A OAD is influenced by the ratio of price of non-callable bond to the price of callable bond.

OAD is indirectly dependent on price of call option.

The delta of the call option does have influence on OAD.

So answer is (a).

< TOP

48. B Mini-Max FRNs consist of minimum and maximum coupons. Investors benefit in terms of high

spread over the LIBOR but have to agree to minimum rate as well as a maximum rate on their noted,the differential between the two being very small. These are also referred to as collared FRNs.

< TOP

49. D The conversion value of the bond = 41 15 = Rs.615

The investment value of the bond = Rs.500

The market premium = (Market price of the bond Investment value)/Market price of bond

= (663 500)/663 = 24.59%

< TOP

50. C Conversion parity price of stock = Bond Price/Number of shares on version per warrant = 665/40 =Rs.16.625

The price of the should increase by (16.625 15)/15 = 10.83% from Rs.15 to reach conversion parityprice of Rs.16.625

< TOP

51. B In case of a puttable bond, Investor acquires a right to exercise his option at predetermined price.

Puttable bond involve two trnsactions- purchase of a non-puttable bond and purchsae of a put optionon the bond purchsae

Investor will exercise the put option when the market yield is greater than the coupon rate on thebond.

Price of the puttable bond is equal to the price of the non- puttable bond and price of the put option.

So answer is (b).

< TOP

52. C Conversion premium = Market price of the bond Conversion value = 98318X

Break even period = Conversion premium/ (Interest income Dividends)

= [98318X] /(901X) = 2.075 years

Conversion rate (X) = 50

< TOP


22/24

22

53. E Future contracts are traded in an organized location know as exchange.

Terms of the contract are highly standardized.

Contrcts are cleared by seprate clearing house.

Future contracts can be easily closed.

Hence answer is (e).

< TOP

54. E The backwardation in a futures market refers to

(i) when the futures prices are lower than cash prices and

(ii) when the basis is positive. The difference between the cash price and futures price of acommodity is referred to as basis.

< TOP

55. D The margin depends on the price volatility of the underlying. Exchanges generally set this marginequal to

Margin = 3 +

Where is the average daily absolute change in the value of the contract and is the standarddeviation of these changes measured over a period of time.

Substituting the given values, we get

Margin = 2.50 1000 + 3 0.5 1000 = 2500 + 1500 = 4000.

Hence the correct answer is (d).

< TOP

56. C Call option is a contract that confers the right, but not an obligation to the holder to buy anunderlying asset at a price agreed on a specific date or by a specific expiry date. In the given case,the investor is interested to hedge his forex payments and have a minimum risk position. Hence, it isbetter for him to enter into a call option to purchase the required forex at an agreed price on theexpected future date. Thus if the exchange rate behaves against the expectation the investor shall notexercise his right and the loss that will be incurred will be only the premium paid by him to thewriter of the option. Hence, the answer is (c).

Though payment can be hedged through purchasing the forex futures or entering into a forwardcontract to purchase, there is no downside limit to the loss that can be incurred

< TOP

57. E The traders in a futures exchange, who tend to carry positions for longer periods are known asposition traders.

< TOP

58. C In the situation, given your long position you have profited from the price increase.

Therefore, option (c) is the correct answer.

< TOP

59. C An option writer who writes a call option has an obligation to sell whereas the buyer or the holderhas the option to buy. A call option will be exercised by the buyer only when the price of the stockon the expiration day is more than the strike price of the call option. In the given case as the price ofthe stock on the expiration day is less than the strike price, the option holder will not exercise theoption and pays the premium of the option to the writer. Hence, the gain to the writer will bepremium which in this case is Rs.3.

< TOP

60. B The time to expiration is directly related to the option premium. Longer the time to expiration, higheris the option premium. Thus, other things being equal, call option premiums for a given asset tend toincrease when the time to expiration increases.

< TOP

61. E All the statements are the use of the security market indices, so correct answer is (e). < TOP

62. A OTCEI was established to have faster transaction, greater liquidity in the market and a trnsparency intrnsactions.

Compnies with an issued capital ranging from Rs.30 lakh to less than Rs. 3 crore are eligible to listtheir shares under OTCEI.

OTCEI is first screen-based trading exchange in India.

OTCEI permit trading of equity and debentures.

So the answer is (a)

< TOP

63. D In discretionary orders, the broker has the discretion to decide whether to buy or sell the security andalso its price.

< TOP


23/24

23

64. B Executive committee looks the day to day functioning of the organization and strives to attain theobjectives

< TOP

65. C Beneficiary owner account is used to hold and transact in commodity balance only.

Clearing member pool account is used for the purpose of the settlement of delivery obligation.

So answer is (c).

< TOP

66. E The commodity markets can be divided in the three groups:

Agricultural marketMetal market

Energy market

So the answer is (e).

< TOP

67. B For a real asset which already exists, the application of market approach is more suitable.For a property with same risk-return characteristics, application of income approach ismore suitable.

For a real asset which is to be brought and developed, the application of cost approach is moresuitable.

Hence answer is (b).

< TOP

68. A In this market each packet is unique.There are relatively fewer players in the market.

The price of property is influential.

This market is subject to extensive Government controls.

So answer is (a).

< TOP

69. E 2 2

2 2

35000(1.10) 35000(1.10) 35000(1.10) (1.05)

(1.14) (1.14) (1.14) (0.14 0.05)= + +

= Rs.4,46,540.

< TOP

70. D The micro factors are identified as physical characteristics like size, age, quality and location andleasehold/freehold. All under (a) (b) (c) and (e) are macro factors. So answer is (d).

< TOP

71. E Using the for break-up of assets of mutual fund, we can calculate the value of total assets as follows:

Total Assets of the fund = Accrued Income/% of accrued income in total assets

= 50/0.0382 = 1308.9

NAV=

Unit holdersClaim

Numberof Units= 1308.9 0.8164/70 = 1068.59/70 = Rs15.26

Hence the correct answer is (e).

< TOP

72. E The reasons for the current market price being less than the NAV can be as follows:

I. Investors doubt about the abilities of the funds management.

II. Lack of sales effort.

III. Riskiness of the fund.

IV. Lack of marketability of the funds units.

Therefore, Option (e) is the correct answer.

< TOP


24/24

73. E The initial issue expenses in respect of any scheme may not exceed 6% of the fund raised under thatscheme. So maximum initial issue expenses can be [Rs.550 crore* 0.06]= Rs.33 crore.

So correct option is (e).

< TOP

74. C The amount by which the total assets of the company exceed the sun of its reserves than it is calledsolvency capital.

< TOP

75. C Monthly pension under EPS = {pensionable salary *( pensionable year of service+2)}/70

= {25000*(35+2)}/70= Rs. 13,214

< TOP

76. B 7.5% CG2017

Amount in Rs.

Value of the security 99,81,000.00

Interest for the period 1st July to 10th December 3,33,333.33

Total 1,03,14,333.33

This actual amount borrowed will , therefore be 1,03,14,333.33

Since the contract envisage payment of interest on the borrowing at 10% for 14days the interest is 1,03,14,333.33*.10*14/365 39,561.83

Total amount to be paid by Andhra bank to Southern bank 1,03,53,895.16

The price of the buyback of the security will be now worked out as under

Amount to be paid 1,03,53,895.16Interest for 174 days i.e. from 1st July to 25th December 3,62,500.00

Price of the security 99,91,395.16

< TOP

< TOP OF THE DOCUMENT >

0801 fm (cfa550)_norestriction

Documents