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

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28.
Which of the subsequent statements are actual with respect to Option-Adjusted-Spread (OAS)?

I. It is a measure of the yield spread, which can be used to convert differences ranging from the values and the prices.

II. It is basically used as a tool to reconcile value with market price.

III. The higher the expected interest rate volatility, the higher the OAS.

IV. The cash flows of the callable bond are adjusted to reflect the embedded option; the resulting spread is called choice adjusted spread.

(a) Both (I) and (IV) above (b) Both (II) and (III) above

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

(e) (II), (III) and (IV) above.
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29.
Ami Constructions Ltd. is coming up with a project of shopping complex in Ahmedabad. The project is to be financed by debt and equity in equal proportion. Debenture bearing a coupon of 8% and maturing in 10 years is to be issued. The interest will be compounded annually. needed rate of return for equity holders is 12%. To redeem the debt, a sinking fund is established. The capitalization rate for the project is

(a) 12.35% (b) 12.65% (c) 13.45% (d) 14.55% (e) 14.95%.
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30.
Every close-ended scheme launched by the Asset Management Company should be listed on a recognized stock exchange within a period of 6 months from the date of closure of subscription. However, this is not mandatory in certain cases other than which of the following?

(a) There is a provision in the scheme for periodic repurchase facility to all the unitholders

(b) The scheme provides for monthly income

(c) The scheme opens for repurchase within a period of 6 months from the date of closure of the subscription

(d) The scheme takes into account the needs of certain classes of persons like physically handicapped, children etc. without a provision for periodic repurchase of units

Earning:   Approval pending.