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

II. The percentage price change increases at a diminishing rate as the bond’s maturity time increases.

III. provided the maturity, the change in bond price will be greater with an increase in the bond’s YTM than the change in bond price with an equal reduce in the bond’s YTM.

(a) Only (I) above (b) Only (II) above

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

(e) Both (II) and (III) above.
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21.
subsequent are the 1-year rates for the central government securities:

Forward rate after 1 year
9.50%

Forward rate after 2 years
13.56%

Spot rate on 1 year
8.5%


obtain the spot rate of 3-year central government security.

(a) 10.25% (b) 10.50% (c) 11.00% (d) 12.00% (e) 34.50%.
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22.
Saraswati Metals issued a 13% bond (face value Rs.200) redeemable after five years at a premium of 5%. Purchase price is 191.5. YTM at this point of time is 15%. Company also has call and put choice on the bond. If the YTM modifications to 12% immediately after the problem of the bond, then which of the subsequent statement is true?

(a) Coupon payment will increase

(b) Capital gain was greater in the earlier year than in the later years

(c) Investor will exercise their put choice as soon as YTM falls to 12 %

(d) Duration of the bond get reduced immediately after YTM modifications

(e) Investor will exercise their call choice as soon as YTM falls to 12%.
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23.
Which of the subsequent would be the best measure of default risk for a bond?

(a) The bond's yield to maturity (b) The bond's duration

(c) The bond's current yield (d) The bond's maturity

(e) The bond’s credit rating.
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24.
Under bond immunization, which of the subsequent is not the condition for perfect immunization of investment?

Earning:   Approval pending.