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

(a) The investment is made in default free bond

(b) Buy-and-hold strategy is adopted

(c) There is only a time change in interest rate during the investment horizon

(d) The term structure is upward sloping

(e) The duration of a bond is matched with the investment horizon.
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25.
If stock is purchased at Rs.50 and a Rs.55 call is written for a premium of Rs.2, the maximum possible gain per share is

(a) Rs.2 (b) Rs.5 (c) Rs.7 (d) Rs.8 (e) Rs.10.
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26.
Margin in a futures contract depends on the price volatility of the underlying asset. The margin requirement can be estimated by calculating

I. avg. daily absolute change in the value of futures contract.

II. avg. number of transactions of the futures contract.

III. Standard deviation of the absolute change in the value of futures contract.

IV. Coefficient of variation of the absolute change in the value of futures contract.

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

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

(e) Both (II) and (IV) above.
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27.
Which of the subsequent statements is/are true, if Ps is the current market price of the common stock, Pe is the exercise price of the warrant and N is the number of shares per warrant?

I. The minimum value of the warrant is (Ps–Pe)N, if Ps > P e.

II. The maximum value of the warrant is Ps N.

III. The minimum value of the warrant is 0 if Ps P e.

(a) Only (II) above (b) Only (III) above

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

Earning:   Approval pending.