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

III. The major drawback of KRD is that it is computed based on the assumption of parallel shifts in the yield curve.

IV. The sum of KRDs will be equal to the effective duration.

(a) Only (I) above (b) Only (III) above

(c) Both (I) and (IV) above (d) Both (II) and (III) above

(e) Both (III) and (IV) above.
< ans >

25.
Which of the subsequent choices is/are not in-the-money?


kind of choice
Strike price (Rs.)
Market price (Rs.)

I
Call
250
230

II
Call
300
220

III
Call
170
170

IV
Put
200
200

V
Put
300
250



(a) Only (I) above (b) Only (V) above

(c) Both (III) and (IV) above (d) Both (I) and (V) above

(e) (I), (II), (III) and (IV) above.
< ans >

26.
Which of the subsequent foreign exchange transaction does not involve credit risk?

(a) Spot transaction (b) Forward contract

(c) choice forward contract (d) Futures contract

(e) Swap deal.
< ans >

27.
Chaitanya Ceramics Ltd. had issued partly convertible debentures with a face value of Rs.100 carrying a coupon rate of 10% and a maturity of six years. It pays interest semi-annually. 40% of the face value of the debenture is to be converted into one-equity shares at the end of three years. Rest 60% face value will be redeemed at par at the end of the maturity. Discount rate for this bond is 8%. The value of the bond after four years will be

(a) Rs.103.63 (b) Rs.41.45 (c) Rs.62.18 (d) Rs.54.04 (e) Rs.90.06.

Earning:   Approval pending.