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

20.
Which of the subsequent statements is false?

(a) An important drawback of current yield is that it considers only coupon income as a source of return to the investor ignoring interest & capital gain (loss) that would also accrue

(b) YTM is measured by comparing the current value of coupon payments and capital gains or loss arising out of sale of bond to the prevailing market price.

(c) Calculating the IRR of a coupon payment and redemption value provide the actual return on the bond which is known as the yield to maturity

(d) Current yield of bonds selling at premium would be less than the coupon interest rate.

(e) Current yield and Yield to maturity varies inversely with the market price.
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21.
Which of the subsequent causes the demand for loanable fund to shift left i.e. demand for loanable fund to reduce according to loanable fund theory?

(a) An increase in the real GDP

(b) An increase in the tax on interest income

(c) An increase in the tax rate on business profits

(d) An increase in the interest rate

(e) Increase in corporate earnings.
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22.
A 20-year maturity, zero coupon bond is issued with a yield to maturity of 8% and a face value of Rs.1,000. The imputed interest income in the 2nd and last year of the bond’s life are

(a) Rs.18.54 and Rs.74.07 (b) Rs.17.16 and Rs.69.83

(c) Rs.15 and Rs.60 (d) Rs.20 and Rs.62

(e) Rs.16 and Rs.61.
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23.
Mr. Prashant buys a 12.5% bond at par on 1/7/2005 maturing on 1/7/2010. At which of the subsequent holding period the terminal value will remain same, irrespective of change in the reinvestment rate?

(a) three years (b) 3.67years (c) 3.97 years (d) four years (e) 4.2 years.
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24.
Which of the subsequent statement is/are not accurate with respect to Key Rate Duration (KRD)?

I. KRD can identify the price sensitivity of an choice embedded bond to every segment of the spot yield curve.

II. KRD can capture the influence of multiple market factors on the yield curve movement.

Earning:   Approval pending.