A QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COM
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Equity Markets
Q1) Match the following:
a) If this stock price moves up, the market is buoyant, if it declines, the market falls b) It is also the net asset value of a company's shares in case of liquidation. c) Instruments issued by registered foreign institutional investors to overseas investors. d) When you sell something that you do not own e) An investor overlooking macro-economic factors, instead focusing on a particular stock
1) Bottom-up Approach 2) Short Sell 3) Book Value 4) Participatory Notes 5) Bellwether stock Q2) You are an Investment advisor. One day, the market price of Infosys shares falls below its intrinsic value, because of factors affecting the overall market. What would you suggest to your client? Choose the correct option. Sell, as it is overvalued a) Sell, as it is overvalued b) Buy, as it is undervalued c) Sell, as it is undervalued d) Buy, as it is overvalued Q3) You, a trader, have done a thorough study, and realized that the economy is not doing well and the software industry is also under-performing. But your boss asks you to keep buying Infosys stock. What kind of trading philosophy is your boss applying? Choose the correct option. a) Horizontal Approach b) Top-down Approach c) Bottom-up Approach d) He has gone crazy Q4) Following are the steps involved in Issuance process. Arrange them in proper sequence. i) Agreement with depository ii) Public Announcement and allotment iii) Applying for listing at the exchange iv) Filing prospectus with SEBI and ROC v) Eligibility Check Q5) The government has announced a subsidy of INR 10,000 crore for farmers to purchase farm equipment. Which of the following stocks will be affected by the above decision? TREASURY AND CAPITAL MARKETS A QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COM Finitiatives Learning India Pvt. Ltd. (FLIP), 2010. Proprietary content. Please do not misuse! a) Maurti Suzuki Motors b) Mahindra & Mahindra c) Nagarjuna Fertilizers d) State Bank of India Q6) Sachin has short sold 100 shares of Tata Steel at INR 395. He wants to protect his losses at INR 5000.Presently the shares are traded at INR 390. At what level should he place a stop loss order? a) Stop loss buy order at Rs.345 b) Stop loss sale order at Rs.345 c) Stop loss buy order at Rs.445 d) Stop loss buy order at Rs. 440 Q7) Following is a order book of Tata Steel on a particular date.
If you give a sell order of 500 shares at 430.85, will your order be executed? Q8) Ipsita bought an option contract to buy 100 shares of ABAG Ltd. at an agreed price of INR 120. She paid a premium of INR 12 per unit. The seller added a feature which would make Ipsita loose the option, if the market price exceeds INR 200. What is the maximum profit that Ipsita can earn in this transaction? a) INR 8,000 b) INR 6,800 c) Unlimited
Q9) If a trade is done in the Indian stock market on Thursday, when will the trade settle? a) Saturday b) Sunday c) Friday d) Monday TREASURY AND CAPITAL MARKETS A QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COM Finitiatives Learning India Pvt. Ltd. (FLIP), 2010. Proprietary content. Please do not misuse!
Q10) Infosys Technologies, has shown steady growth. The world economy is, however, going through a financial turmoil during this period. What will be your strategy in this scenario? a) Buy it b) Stay Invested c) Sell it d) Stay out
Q11) The values of stock prices of Sans, Forto & the market index are given below. Calculate beta for both stocks? Decide which of these stocks you would buy, if the market is expected to move up?
Q12) You purchased 150 stocks of ITC at INR 200 per share and borrowed INR 15,000. You received a margin call when the stock price fell to INR 175. What is the maintenance requirement prescribed by the broker? a) 45% b) 43% c) 35% d) 50% Q13) Mr. Ashish short sells 500 shares of Reliance Ltd. at a price of say INR 2500. He borrows the shares from Mr. Sachin at a rate of 12% per annum, for a month. If the closing price for the Reliance share after 1 month is INR 3000. What is the total gain or loss of Mr. Ashish? TREASURY AND CAPITAL MARKETS A QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COM Finitiatives Learning India Pvt. Ltd. (FLIP), 2010. Proprietary content. Please do not misuse! a) Gain of INR 2,50,000 b) Loss of INR 12,500 c) Gain of INR 2,67,500 d) Loss of INR 2,67,500 Q14) Security: XYZ ltd. Following are the transactions made by different clients: On 1st May, Rahul bought 50 XYZ shares On 2nd May (Ex-dividend date) - Mohan bought 30 XYZ shares On 3rd May (Record date) - Raj bought 100 XYZ shares. If the settlement convention in this stock market is (T+2). Who is/are entitled to get the dividends? Q15) A client has bought 1000 shares of X Ltd. on 21 st J une 2010 at a price of INR 125 per share. The client has a loss limit of INR 25,000. On 22 nd J une 2010, the share closed at a price of INR 98. Does the client need to square his position? Bond Markets Q1) GoI issues a 5 year, 8% bond with a FV of INR 100. The interest rate falls by 100 basis points. Reacting to the interest rate change, GoI issues another bond @ 7%. What will be the effect on the yield of the 1st bond and its market price. a) Yield =7% and Market Price =INR 104.10 b) Yield =7% and Market Price =INR 114.28 c) Yield =8% and Market Price =INR 104.10 d) Yield =8% and Market Price =INR 114.28
Q2) Which of the following factors, other things remaining the same, will decrease the bond price?
a) Increase in the coupon rate b) Decrease in the yield of the bond c) Increase in the yield of the bond
Q3) A bond of INR 100 face value pays 9% coupon. The coupon is paid annually and has a maturity of 3 years. Yield to Maturity (YTM) is 7%. What is the price of the bond? Q4) The interest payable on a bond is 12.00% per annum. The interest (simple interest) is paid semi- annually. What is the interest amount on an investment of INR 1,00,000 between 1-J an-2009 and 20- J un-2009?(Act/360 convention) Q5) What is the number of days in the following interest periods, if we use the actual convention? TREASURY AND CAPITAL MARKETS A QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COM Finitiatives Learning India Pvt. Ltd. (FLIP), 2010. Proprietary content. Please do not misuse! a) Feb 1 st 2008 to Sep 10 th 2008 b) Mar 10 th 2009 to Sep 12 th 2009
Q6) RBI gave a notification for the auction of 6.8% government stock 2014 for an amount of Rs.1000 crore. The following are the details of the bids submitted by various banks. The cut-off price for the auction is 100.80, and it is a Dutch auction. List the successful bidders and state whether the issue is fully subscribed in the auction or not?
Bank Bid Amount (in INR crore) Price (in INR) A 200 101.50 B 250 100.50 C 400 102 D 350 101.75
Q7) There is an auction for a 10 year bond. The market price, pre-auction, for a similar bond in the market is 108.50, which translates into a yield of 6.75%. Now, in the auction, you decide to bid at 3 price levels INR 108.75, INR 109 and INR 108.25. The cut-off announcement declares the cut-off as 108.53. If this were a French auction, at what price will you get the instrument? Q8) Let's now presume the auction announced is for issuance of a new 10-year bond. Market yield pre- auction for 10-year GOI securities, is around 7.15%. You put in 3 bids: a) 7.26% b) 7.05 % c) 7.20% The cut-off announced is at 7.14%. Which bid/bids will be accepted? Q9) Government has announced a 8% subsidy for oil companies. This subsidy will be funded by issuing more G-secs. As a bond trader, what should be your trading strategy? Q10) The Coal India IPO is expected to suck out over 15000 crores of rupee funds from the system, as the issue is expected to be heavily oversubscribed. This will impact the bond market, a) Favourably, as the response is tremendous b) Adversely as liquidity conditions could get tight temporarily Q11) 6.5% coupon,3 year bond, FV 100,coupon semi-annual, DC 30/360.What is the Modified Duration if the YTM is 8%? TREASURY AND CAPITAL MARKETS A QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COM Finitiatives Learning India Pvt. Ltd. (FLIP), 2010. Proprietary content. Please do not misuse! Q12) 6.5%, 3 year bond, FV 100, coupon semi-annual, DC 30/360.What is the Macaulay's Duration if the YTM is 8%? Q13) 6.5%, 3 year bond, FV 100, coupon semi-annual, DC 30/360.What is the PV01 for the portfolio if the YTM is 8%? Currency Markets Q1) 1 AUD = 0.6950 USD Which is the stronger currency between the two and which is the base currency? Q2) Answer the following questions if the markets rates are given as: USD/J PY = 97.65/97.70 a) Quoter sells USD at b) Quoter buys USD at c) Asker buys USD at d) Quoter sells J PY at Q3) If the following exchange rates are given, then calculate the exchange rate for a J apanese importer, wanting to buy EUR(EUR is the base currency). USD/J PY = 97.65/97.70, EUR/USD = 1.3275/1.3280 Q4) Following are the quotes given by various banks Bank Quotes (USD/ CHF) A 1.1410/1.1415 B 1.1412/1.1417 C 1.1411/1.1416 D 1.1408/1.1413
If you wish to sell CHF, which bank would you choose? Q5) Last month the USD/INR rate was 48.56. Today the quote is 48.58. This indicates that rupee has depreciated. True or False Q6) USD/INR is 44.50/55. You wish to sell INR. Your quote will be: a) 44.52/57 b) 44.48/53 Q7) RBI Governor says: We have no intention to curb the huge FII inflows. What will be the impact of the above statement on the USD/INR exchange rate? TREASURY AND CAPITAL MARKETS A QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COM Finitiatives Learning India Pvt. Ltd. (FLIP), 2010. Proprietary content. Please do not misuse! Q8) What is the 1 month forward FX rate for USD/INR, given the following market rates? Spot FX Rate: 1 USD = INR 44.50 1 month USD interest rate: 2.5% p.a, Act/360 1month INR interest rate: 7.3% p.a, Act/365 Trade Date: 21-Sep-2010 Spot Date: 23-Sep-2010 Maturity Date: 23-Oct-2010 Q9) An Indian company is exporting some machinery to Switzerland, the payment for which will be received 3 months hence. The company approaches the bank for a 3 month forward price in CHF/INR. Market Rates: Spot USD/INR = 48.15/25; Spot USD/CHF = 1.2350/60 3 month USD/INR swap rate (pips) =0.20/0.30 3 months USD/CHF rate (pips) = 0.15/0.25 Bank margin is 6 paise. What is the customer rate?
Answers Equity Markets Q1 a-5, b-3, c-4, d-2, e-1 Q2 b Q3 c Q4 The sequence is v-iv-iii-i-ii Q5 Mahindra & Mahindra Q6 c Q7 No Q8 b Q9 d Q10 d Q11 Sans 1.0145 Q12 b Q13 d Q14 Rahul Q15 Yes
TREASURY AND CAPITAL MARKETS A QUALITY E-LEARNING PROGRAM BY WWW.LEARNWITHFLIP.COM Finitiatives Learning India Pvt. Ltd. (FLIP), 2010. Proprietary content. Please do not misuse!
Bond Markets Q1 a Q2 c Q3 105.24 Q4 INR 5700 Q5 a) 222 b) 187 Q6 Undersubscribed by INR 50 crore; A,C & D are successful bidders Q7 Both at 109 and 108.75 Q8 7.05% Q9 Sell the bonds Q10 b Q11 2.6617 Q12 2.7682 Q13 0.0256
Currency Markets Q1 Stronger currency USD, Base currency AUD Q2 a) 97.70 b) 97.65 c) 97.70 d) 97.65 Q3 129.75 Q4 Bank D Q5 True Q6 a Q7 Rupee will appreciate Q8 44.67 Q9 39.04