Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis-I - Question Paper

90FVIFA­(7%, 4) – (90 4)
90FVIFA­(7%, 5) – (90 5)


= 0
=6.30
=19.34
=39.59
=67.56

10%
90FVIFA­(10%, 1) – (90 1)
90FVIFA­(10%, 2) – (90 1)
90FVIFA­(10% 3) – (90 1)
90FVIFA­(10%, 4) – (90 1)
90FVIFA­(10%, 5) – (90 1)


=0
=9.00
=27.90
=57.69
=99.46























b. Market price and capital gains @ 7%

At reinvestment rate of 7%
Holding period (Years)

1
2
3
4
5

1. Purchase price (Rs.)
1124.80
1124.80
1124.80
1124.80
1124.80

2. Market price at the end of the holding period (Rs.)
90 PVIFA (7%, 4) + 1060 PVIF (7%, 4)
90 PVIFA (7%, 3) + 1060 PVIF (7%,3)
90 PVIFA (7%, 2) + 1060 PVIF (7%, 2)
90 PVIFA (7%, 1) + 1060 PVIF (7%, 1)
90 0 + 1060


= 1113.52
= 1101.47
= 1088.52
= 1074.79
= 1060

3. Capital gain (2) – (1) (Rs.)
-11.28
-23.33
-36.28
-50.01
-64.8




Market price and capital gains @ 10%

At reinvestment rate of 10%
Holding period (Years)

1
2
3
4
5

1. Purchase price (Rs.)
1124.80
1124.80
1124.80
1124.80
1124.80

2. Market price at the end of the holding period (Rs.)
90 PVIFA (10%, 4) + 1060 PVIF (10%, 4)
90 PVIFA (10%, 3) + 1060 PVIF (10%,3)
90 PVIFA (10%, 2) + 1060 PVIF (10%, 2)
90 PVIFA (10%, 1) + 1060 PVIF (10%, 1)
90 0 + 1060


= 1009.27
= 1020.20
= 1032.18
= 1045.47
= 1060

3. Capital gain (2) – (1) (Rs.)
–115.53
–104.60
–92.62
–79.34
–64.80


c. Total Return

Reinvestment rate

Holding Period ( Years)

1
2
3
4
5

7% (YTM)
Coupon income
90
180
270
360
450

Interest on interest
0
6.30
19.34
39.59
67.56

Capital gains
-11.28
-23.33
-36.28
-50.01
-64.8

Total return
78.72
162.97
253.06
349.58
452.76

10% (YTM)
Coupon income
90




180
270
360
450

Interest on interest
0
9.00
27.90

Earning:   Approval pending.