iiird sem 2012 all questionpapers in this word file

8/9/2019 IIIrd Sem 2012 All Questionpapers in This Word File

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nN.L.DALMIA INSTIUTE OF MANAGEMENT STUDIES AND RESEARCH

MMS/PGDBM-III SEMESTER (Finance) (FINAL EXAMINATION)

Po!"o#io Mana$e%en!- R&c'ia A$aa#

D&a!ion* + , Ho& Ma. Ma* 0

Q1. The correlation between two assets A and B is 0, A = 10% & B= 20%, E(Ra=1!% andE(Rb= 20%. "hat will be the wei#ht o$ asset A in the ini 'ariance ort$olio.

) *ar+s

Q2. Ris+ $ree rate in an econo is -%. The retrn eected $ro ar+et ort$olio is 1!% and theris+ is 20%. /$ the ris+ bd#et o$ an in'estor is 1!%, what is the best ossible retrn he canachie'e ) *ar+s

Q). Assin# ort$olio consists o$ n eall wei#hted secrities, ro'e that 3 *ar+s

a Beta o$ ort$olio is eal to wei#hted a'era#e Beta o$ indi'idal secrit.b The onl rele'ant ris+ is the ssteatic ris+ when n becoes lar#e.

Q4 ro'e that $or otial asset allocation, *ar#inal ris+ 5 Ecess Retrn Ratio is sae $or all assetsand the ratio is eal to the Ris+ A'ersion. 3 *ar+s

Q!. 6i'en that the eected tilit = E 7 8152 9: where 9 is the de#ree o$ ris+ a'ersion. ;sin# thisderi'e the roortion o$ allocation o$ tan#enc ort$olio or ris+ assets with a 'iew to aii 10 *ar+sE(Ra = 20% E(Rb = 1!%a = 1!% b = 10%

a ?onsider a ort$olio with a wei#ht o$ 30% in A and 40% in B. The standard de'iation o$ is!%. "hat is the eected retrn o$ ort$olio "hat is the correlation between A and B

b The tan#ent ort$olio, T, has a wei#ht o$ )!% in A and 3!% in B. "hat is the eected retrnand the standard de'iation o$ T

c Asse that the ris+8$ree rate in the econo is -%. "hat will be the wei#ht o$ the ris+ $reeasset in an e$$icient ort$olio @ with an eected retrn o$ 1!% "hat is the standard de'iation o$this ort$olio /$ beta o$ this ort$olio is 0.!, what roortion o$ the 'ariabilit o$ R is de tossteatic ris+ and nssteatic ris+

Q. ?oent on $ollowin#> 10 *ar+s

a ?A* is not testable becase ar+et ort$olio is not obser'able.b *ar+et E$$icienc does not reire that the ar+et 'ale be eal to intrinsic 'ale at all ties.c A test $or ar+et e$$icienc is a oint test $or ar+et e$$icienc and accrac o$ ?A*.d The std. de'iation o$ a ort$olio o$ 2 assets which are er$ectl ne#ati'el correlated is Cero.e "hen the two assets are er$ectl ositi'el correlated, the std. de'iation o$ ort$olio is thewei#hted a'era#e o$ standard de'iation o$ two stoc+s.

Q-. Deri'e atheaticall the ?A* (?aital Asset ricin# *odel, clearl statin# the asstionsbehind the odel. 3 *ar+s


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N.L.DALMIA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH

MMS/PGDBM-III SEMESTER(FINANCE) OCT +01+

DERI2ATI2ES - Na3een B'a!ia

D&a!ion *4 Ho& Ma. Ma* 5

PART A ( S&$$e!e6 !i%e + H) 70 %a

PART A THE TEST IS A MULTIPLE CHOICE ONE. 8OUR ANS9ERS SHOULD BE SUPPORTED B89OR:INGS/ REASONING IN THE SHEET THAT 9ILL BE PRO2IDED TO 8OU. NO MAR:S FOR

GUESSING. T'e ane 'o ;e !ice6 in !'e %ain a>e*

Q1. "hich o$ the $ollowin# call otions see to be isriced #i'en the sot rice is100 and all the otions ha'e a atrit o$ 1 onth.

F -! G0 G! 100 10! 110 11!? 1!. 11.G0 .01 4.! 1.-) 0.! 0.23

/ F=100 // F=G0 /// Both F=G! AHD F=10! /I Either otion // or ///

Q2. o ha'e an Asset whose Jot rice is Rs. 100. o want to hed#e the asset $rodownside ris+ which o thin+ will be 'er hi#h drin# the net two onths. o decide

to hed#e b sellin# the 2 onths $orward on the Asset . The asset rice actall went drin# the net one onth and o were $orced to sare or $orward contract. /$ the assetrice is G0 a$ter one onth and RKR is 1% . , whatLs

or o'erall ort$olio 'ale a$ter 1 onth

i 101 ii 100.G0 iii 101.10 i'100.10

Q). The Re5M sot rate is 4. "hatLs the eected sot rate o$ Ree three onths $ro now ,#i'en that interest rate in /ndia % .a and in ;J is !% .a.

i 4.-4 ii ?anLt be deterined iii 4.2) i' 43.

Q4. 6i'en J= 100 and F= 101 and RKR = 1% . /$ a one onth ?all otion is riced at Rs.).00 what shold be the t otion rice >

i 2.01 ii ) iii) ).GG i' 2

Q!. "hich o$ the $ollowin# is correct.

i A lon# ?all and a short $orward is ei'alent to a short tii A lon# call and a short $orward is ei'alent to a lon# tiii A short t and a Jhort Korward is Eal to Jhort ?alli' Both ii & iii are correct.


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Q3. Ris+ Hetral Ialation ilies thati Ntions are ris+ $reeii /n'estors are ris+ netraliii The ris+ o$ the deri'ati'es can be eliinated $or a short while b delta hed#in#i' Hone o$ the abo'e

Q. AT* Ntions ha'e ai tie 'ale becasei ;ncertaint that the otion will end in the one or ot o$ one is

aiii robabilit that otion will end in the one is close to !0%iii Both i AHD iii' The intrinsic 'ale is

i Soss o$ 1!0ii Soss #reater than 1!0


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iii Soss less than 1!0i' ?ant be deterined withot +nowin# the tie 'ale

Q1).The sot Rs5M rate is !2. o created a three onth ran#e $orward b bin# a t otiononM at a stri+e o$ !2(cost 1Re and sellin# a call otion at a stri+e o$ !4(cost 0.!0Rs./$ the sotrate a$ter ) onths is Rs.!!, or net ao$$ will be

i !4.!0ii !).!0iii !4

i' !!

Q14. Drin# the be#innin# o$ the crrent onth or 'iew is that Hi$t will #o to !G00le'els $ro crrent le'el o$ !00 le'els . o can create a bll Jread to caitali


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Q1G.A Jtoc+ is riced at Rs. 100 toda. The Eected retrn $ro the stoc+ is 1!% erann( continos coonded, R$r is & er ann (continos coonded and the'ariance is 4% er ann. The eected 'ale o$ J in a ris+ netral world will be

i 10.2!ii 10iii 4.3i' 4.4

Q20. o sold call otions at ilied 'olatilit o$ 40% er ann and decided to do dnaic

delta hed#in#. o are li+el to a+e ro$it, i$

i Reali


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0.!% . At each sta#e , also show the Oed#e Ratio and the in'estent in the ris+lessAsset, and the relicatin# ort$olio X (? %a)

N.L.DALMIA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH

MMS/PGDBM-III SEMESTER(FINANCE) OCT +01+

FIXED INCOME SECURITIES @ Na3een B'a!ia

D&a!ion * 4 Ho& Ma. Ma * 7

Q.1. "ith resect to bonds elain the $ollowin# ters

i Barbell, Sadder and Bllet Jtrate#.ii *ertonLs *odel o$ Debt as a t Ntion and its alication

iii lanned Aorti


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3) /$ ) *onths Korward Rate ) *onths $ro How is 3.!% and o b a ?alet and sell aKloor let at 3.!% stri+e $or ) onths eriod ) onths $ro now, or e$$ecti'e rice is

i 10 basis ointii 20 basis ointiii Ceroi' ?ant be deterined $ro the abo'e data as we also need the 'olatilit o$ interest

rates to deterine the otion ricesV1 %a

'i ;sin# *ertonLs odel $or an Enterrise with a Cero ?oon Debt *atrin# in !ears o ha'e deterined H(8D2 = 1!%. . Assin# eal de$altrobabilit in all ! ears , whatLs that robabilit X + %a( show calclation

'ii A ar Bond with a *atrit o$ 20 ears is tradin# at a T* o$ -%. The*odi$ied Dration o$ the Bond is 88888888888888888888 + %a

'iii A 10 ear Bond has dration o$ . /$ the 10 ear ield increases b !0 BJ,the ercenta#e chan#e in the rice o$ the Bond will be

i ).!% ii 8).!% iii$all 8).!% i' $all Y ).!%881 %a

i The con'eit o$ a 20 ear


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/$ the swa were riced toda based on the reainder o$ its li$e, calclate the ?DJsread

Q.) Jose a ban+ loan has the $ollowin# characteristics> 6ross re'enes are M1.) illion.

/nterest eense is M0.) illion. The retrn on the M! illion econoic caital in'ested in T8bills is M100,000.

The $ir\s beta is 1.!.

The neected loss $or the loan is estiated at M!00,000.

The adsted RARN? is eal to -%.

"hat is the worst8case loss $or this loan

Q.4 Ad'anced haraceticals is considerin# an in'estent in a 'er ris+ dr# theratreatent. /$ the in'estent is sccess$l, Ad'anced haraceticals can earn sbstantialro$its. Nn the other hand, i$ the thera treatents create lon#8ter side8e$$ects, the $irwill be sbect to eensi'e liti#ation. Oow shold Ad'anced haraceticals strctre

its in'estent to inii


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otstandin# debt is shown below. "hat is the distance to de$alt and the De$alt oint $or?oan @

?rrent $ir 'ale M4,000Eected $ir 'ale M!,000Jtd de' eected $ir 'ale M!00?oan @ Beta 1.4Debt 1> Jhort8ter M1,)00Debt 2> Son#8ter M1,-00

Q.2 Jose a $ir has two debt isses otstandin#. Nne is a senior debt isse thatatres in three ears with a rincial aont o$ M100 illion. The other is a sbordinatedebt isse that also atres in three ears with a rincial aont o$ M!0 illion. Theannal interest rate is !%, and the 'olatilit o$ the $ir 'ale is estiated to be 1!%.Elain the ilication on $ir 'ale i$ interest rates decline in the *erton odel(Hote8 Ho calclation is reired

Q.) /n'estors who in'est in ort#a#e8bac+ed secrities are #i'en a wide ran#e o$in'estent ossibilities to sit their ris+ and retrn re$erences. The 'arios tranchesrecei'e aents ot o$ the ool\s cash $lows accordin# to a seci$ied schedle.

There$ore, which o$ the $ollowin# tranches shold an in'estent ad'isor #eneralls##est to a client who is see+in# the hi#hest rate o$ retrn

Q.4 A ban+ isses a M200,000,000 loan with the $ollowin# characteristics> Soan as a $ied annal interest rate o$ -.!%.

The interest eense associated with the loan is 3.0%.

The oeratin# cost to the ban+\s coercial lendin# di'ision is M1,300,000.

Econoic caital reired to sort the loan is M13 illion, which is in'ested in

T8bills ain# a rate o$ 2.-%. The eected loss $or the loan is 1! basis oints er ear.

"hat is the ris+8adsted retrn on caital (RARN? $or this loan

Q.! 6i'en the in$oration below, what is the liidit8adsted IaR at the G!%con$idence le'el

?rrent stoc+ rice M200Jtoc+ rice standard de'iation ).0%Bid8as+ sread ean 1.0%

Bid8as+ sread standard de'iation 0.!%IaR con$idence araeter 1.G3

Q.3 A ;.J. ?oan has re'iosl issed a dal crrenc bond that as coons inEros and rincial in en. A aor sbsidiar o$ the coan is based in 6eran andrecei'es ero8denoinated aents. The crrent rice on the bond is -0 with a 20%robabilit o$ de$alt. The anticiated reco'er rate is 30%. Asse the interest rate is


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N.L. Da#%ia In!i!&!e O" Mana$e%en! S!&6ie An6 Reeac'

6DB* X /// Jeester (Kinance Kinal Ea Nct8 2012Banin$ @ Po". A6i!a Ma'aan

Dration> ) Oors *a. *ar+s> 100

/nstrctions

All estions are colsor

Reest to be recisel and to the oint while answerin#

lease write down asstions in case i$ reired while answerin# estions

888888888888888888888888888888888888888888888888888888888888888888888888888888888888888888888888888888888888888888888

Q.1. A cstoer aroached ban+ $or co'erin# iorts obli#ations (in ;JD eected 1.!ears hence $ro toda. Oe wants to co'er the echan#e as well as interest rate ris+ $orthis roceedin#s As a ban+er how will o deri'e this rice to be oted to the cstoer

10 *ar+s

Q.2 ?entral Ban+ has a i'otal lace in the $inancial ar+ets o$ the contr. "hat $nction

central ban+ er$ors to ha'e sch iortance in the econo o$ the contr "hat areindicati'e interest rates in /ndia are considered $or onetar olic stance 1! *ar+s

Q.). /n /ndian ban+in# sste, what are re#lator reser'es the ban+s are reired to be +etwith RB/. lease also elain the cotation $or the sae. 10 *ar+s

Q.4. Kollowin# are the o$$erin#s #i'en b Ban+ @ and Ban+ on deosits. Ban+ @ is /ndianri'ate ban+ while ban+ is $orei#n ban+.

As an *BA stdent, o ha'e been conslted b or arents abot these di$$erentrates, the are interested in +nowin# wh these di$$erent rates eist Reest $or oranalsis and reasonin# $or sch rate di$$erentiation 10 *ar+s

Q.!. what are di$$erent credit deli'er odes nderta+en b ban+ Oow the loan is ricesbased on cstoer ro$itabilit analsis 10 *ar+sQ.3. AS?N is an iortant coittee in the ban+ which de'ises strate#ies $or handlin#

ban+Ls coetin# lon# ter needs and ana#e interrelated ris+s5 it also re'iews interestrate #a as well as liidit #a $or the ban+. lease elain technies sed $oranal


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Q.. Kor e'alation o$ loan reest what 3 ?s are considered lease elain brie$l either*erton odel (on basis o$ which IF odel $or F*I sed or credit i#rationaroach 10 *ar+s

Q.-. Basel accord is the ost in$lential a#reeent in ban+in# indstr. The accord +et one'ol'in# alon# with the $inancial ar+ets and ban+in# indstries to #i'e Basel /, // and/// accords, what are the shortcoin#s o$ Basel / accord #ot o'ercoe in the net 'ersioni. e. B//. "hat are three illars o$ Basel // Oow ar+et ris+ is catred in Basel //

1! *ar+s

Q.G. lease choose correct alternati'e 5 alternati'es 10 *ar+s

i The tradin# ort$olio $or the ban+ area. OT* & AKJ b. OKT & OT* c. AKJ & OKT d. OKT , AKJ & OT*

ii /n interest rate analsis. /$ #a is 'e then nder asstion o$ arallel increase o$ 20basis oints in interest rates, the H/SS(Het /nterest /ncoe will

a. /ncrease b. Decrease c. either increase or decrease d. canLt saiii The oerational ris+ nder Basel accord conders

a. Ris+ o$ $rad b. ris+ Hatral disaster c. ris+ o$ sste related $ailresd. le#al ris+ e. ris+ o$ retation $. strate#ic ris+ #. All

i' when will be a loan be HAa. /nterest and 5or loan installents o'erde $or ore than G0 dasb. A5? is ot o$ order $or ore than G0 das in case o$ o'erdra$t 5 cash creditc. Bill reains o'erde $or ore than G0 das in Bills rchased5 Bills Discontedd. All the abo'ee. Nnl (a and (b

' "hich o$ the $ollowin# alternati'e 5 alternati'es are wron# with resect to non $nd basedad'ances b the ban+a. HN disbrseent o$ $nds at the tie o$ sanctionin#b. Nn balance sheet itesc. ?ontin#ent in natre

N.L. Da#%ia In!i!&!e O" Mana$e%en! S!&6ie An6 Reeac'

**J 5 6DB* X /// Jeester (Kinance Kinal Ea Nct8 2012In!ena!iona# Finance @ Po". Go3in6 Soani

Dration> 2 Oors *a. *ar+s> 30

All estions in section / are colsorAttet An Three estion in section //

Ki#res to the ri#ht indicate ar+s

SECTION @ I

Q.1. Elain the $ollowin# concets> 1! *ar+sa Arbitra#eb Siborc Oard e# and Jo$t e#d articiator Hotes


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e ?ard Rates and Read Rates

Q.2. Jol'e the $ollowin#>

1 A ban+ in Hew or+ otes> ;JD5?OK 1.21G)50)a /s this an Aerican or Eroean oteb ?alclate the ilied in'erse ote> ?OK5;JD

/$ a Ban+ in Crich otes> ?OK5;JD 0.-1!5-! is there an arbitra#eoortnit

/$ es, calclate the ossible #ain on 1 illion nits o$ caital.

2 Jot ;JD5A;D 1.13G0500Annali ) onths 3 onths;JD 2.00 X 2.2!% 2.! X ).00%A;D 2.2! X 2.!0% 2.!0 X 2.!%

?alclate ) and 3 onths $orward ;JD5A;D swa oints./s the ;JD at $orward rei or discont

) /n Hew or+, Ban+ ]AL otes ;JD5?AD 1.1100810 and Ban+ ]BL otes

;JD5?OK 1.21-) X G)"hat is the eected ?AD5?OK otation /$ ban+ ]?L in Toronto otes?OK5?AD0.G128) then calclate the arbitra#e ossibilit, i$ an, on caital ) illion?OK.

SECTION @ II

Q.). Enerate the $eatres o$ the Bretton "oods Jste and the reasons $or its$ailre (10 *ar+s

Q.4. a "rite a short note on /ndian Korei#n Echan#e *ar+et (! *ar+s

b "rite a short note on ]Deositor ReceitsL (! *ar+s

Q.!. a Distin#ish between Direct and /ndirect Echan#e Rates. (! *ar+s

b Distin#ish between KD/ and K/ ( ! *ar+s

Q.3. a De$ine ]Ero8?rrenc *ar+etL and enerate its characteristics (an Kor(! *ar+s

b Describe in brie$ the echanis o$ 6DR isse (! *ar+s

iiird sem 2012 all questionpapers in this word file

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