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

Which of the subsequent statement(s) is/are actual regarding the Term Structure Factor Models?

I. CIR Model can be implemented by regressing cross-sections of bond returns and their durations.

II. Principal Components Models can be used to analyze the returns of zero-coupon bonds of varying maturities to extract a set of characteristic yield curve shifts, which can be described at every maturity.

III. Spot Rate Models can be used to identify factors with the durations of zero-coupon bonds at several points on the yield curve.

IV. Functional Models presume that zero-coupon yield modifications are not described continuously in maturity.

(a)
Only (I) above

(b)
Only (II) above

(c)
Only (III) above

(d)
Both (I) and (IV) above

(e)
Both (II) and (III) above.


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22.
Nilkamal Industries Ltd., a manufacturer of plastic ware, reported earnings per share of Rs.12.50 in 2006, on which it paid dividends per share of Rs.4.107. Earnings are expected to grow 15% a year from 2007 to 2011, during which period the dividend payout ratio is expected to remain unchanged. After 2011, the earnings growth rate is expected to drop to a stable 6%, and the payout ratio is expected to increase to 65% of earnings. The firm has a beta of 1.40 currently, and it is expected to have a beta of 1.10 at the end of 2011. The risk-free rate is 6.25% and the market risk premium is 5.5%. The expected price of the stock at the end of the year 2011 will be

(a)
Rs.235.90

(b)
Rs.243.90

(c)
Rs.274.92

(d)
Rs.285.70

(e)
Rs.294.70.


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23.
Which of the subsequent statements is not actual regarding the price-volume relationships?

(a)
A price rise that is accompanied by expanding quantity is not indicative of any pattern reversal

(b)
If quantities found at a new high are lower, it is an indication of a pattern reversal

(c)
A new high reached with a quantity that is truly diminishing is a warning to a reversal in price

(d)
A distribution accompanied by increased quantity is a bullish factor

(e)
Termination of a bear market is signaled by a selling climax.


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24.
Which of the subsequent statement(s) is/are true?

Earning:   Approval pending.