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

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5.
A 20-year maturity, 12% coupon bond (Face value Rs.1000) paying coupons semi-annually is callable in 5 years at a call price of Rs.1,050. The bond currently sells at a YTM of 10.5%. The yield to call of this bond is

(a)
3.89%

(b)
4.00%

(c)
4.19%

(d)
4.59%

(e)
4.81%.


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6.
Which of the subsequent statements is not actual regarding the Key Rate Duration (KRD)?

(a)
KRD can be used to replicate a portfolio of a bond with embedded choices created with zero-coupon bonds

(b)
The sum of KRDs is equal to the effective duration

(c)
A portfolio’s KRD is the sum of the KRDs of the securities of the portfolio

(d)
KRD can capture the influence of multiple market forces on yield curve movement

(e)
KRD is used when shifts in the yield curve are non-parallel.


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7.
Which of the subsequent statement(s) is/are not actual regarding the Price/Sales ratio?

I. P/S ratio is useful for valuing companies even with no dividends at all.

II. P/S ratio can be positive or negative.

III. Firms with low profit margins and high P/S ratio are undervalued.

IV. P/S ratio is not influenced by accounting methods.

(a)
Only (I) above

(b)
Only (II) above

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

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

(e)
(II), (III) and (IV) above.


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8.
Which of the subsequent statements is not true?

(a)
Secured debentures normally carry a fixed or floating charge on the immovable assets of the company by way of an equitable mortgage

(b)
Unregistered debentures can be transferred only by executing a transfer deed and filing a copy of it with the company

(c)
Convertible zero-coupon bonds can be redeemed by allocation of ordinary shares

(d)
Debenture Redemption Reserve has to be created by the company out of its profits to the extent of 50% of the amount of debentures to be redeemed before the date of redemption

(e)
In case of debentures with call option, the call price is maximum at the beginning of the effective call choice period and declines step-wise towards the face value as the call date approaches the maturity date.

Earning:   Approval pending.