## SOLVED CAIIB COMBINED PAPER 10:

**1. What is the discount factor for Re. 1 to be received at the end of 2 yr with prevalent rate of 8% ?**

a. 0.890

b. 0.873

c. 0.857

d. 0.842

Ans - c

Solution :

= 1/(1+r)n

= 1/(1.08)^2

= 0.857

2. A console bond of Rs. 10000 is issued at 6%. Coupon current interest rates and 9%. Find out the current value of the console bond.

a. Rs.7660

b. Rs.6760

c. Rs.6667

d. Rs.6676

And :c

Solution :

= 10000*0.06/0.09

= 10000*0.6667

= 6667

3. In case of compound Interest, if compounding is done quarterly, then r is divided by ...

a. 2

b. 3

c. 4

d. 6

Ans - c

4. A jar contains 3 red marbles, 7 green marbles and 10 white marbles. If a marble is drawn at random, What is the probability that marble drawn is white?

a. 2/5

b. 1/2

c. 3/8

d. 10/13

Ans – b

Solution :

Here Red = 3

Green = 7

White = 10

Hence total sample space is (3+7+10)= 20

Out of 20 one ball is drawn n(S) = {c(20,a.} = 20

To find the probability of occurrence of one White marble out of 10 white ball

n(R)={c(10,a.} = 10

Hence P(R) = n(R)/n(S)

= 10/20 = 1/2

5. An investment at 10% is compounded monthly, what shall be the effect interest rate for this?

a. 10.18 %

b. 10.25 %

c. 10.47 %

d. 10.51 %

Ans - c

Solution :

= (1+0.10/12)^12-1

= 10.47

6. What is sampling for groups with considerable variation within but similar to each other called ?

a. cluster

b. stratified

c. systematic

d. random

Ans - a

7. 15 year, 8 % Rs 1000 face value bond is currently trading at Rs 958. The YTM of this bond must be......

a. less than 8%

b. equal to 8%

c. greater than 8%

d. unknown

Ans - c

8. Mr.Ram wants to have Rs 20000 after a year. How much he should deposit in a bank to get this amount if the prevailing rate of interest is 9% ?

a. 17896

b. 18104

c. 18224

d. 18348

Ans - d.

Solution :

20000/1.09

9.MR. Ravi is expected to join a professional course after 03 years from now and he would be needing a sum of Rs.3 lacs at that time. If he wants to save the amt in annual installments and prevailing interest rates are 5%, How much amt he should deposit per annum?

a. 92163

b. 90631

c. 91363

d. 92531

Ans - A

Solution :

= fv*r/(i+r)*{(1+r)^n-1}

= 300000*.05/(1.05){(1.05)^3-1}

= 90163

10. If payments are made/received at the beginning of the period, this Annuity is called as ...

a. Perpetual Annuity

b. Annuity Ordinary

c. Annuity Due

d. Advance Annuity

Ans - c

11. A sack contains 4 black balls 5 red balls. What is probability to draw 1 black ball and 2 red balls in one draw ?

a. 12/21

b. 9/20

c. 10/21

d. 11/20

Ans – c

Solution :

Out of 9, 3 (1 black & 2 red. are expected to be drawn)

Hence sample space

n(S) = 9c3

= 9!/(6!×3!)

= 362880/4320

= 84

Now out of 4 black ball 1 is expected to be drawn hence

nb. = 4c1

= 4

Same way out of 5 red balls 2 are expected be drawn hence

n(R) = 5c2

= 5!/(3!×2!)

= 120/12

= 10

Then P(B U R) = n(B)×n(R)/n(S)

i.e 4×10/84 = 10/21

12. Assume that you have a 6% Coupon console bond. The original face value is Rs. 1000 and the interest rate is 9%. Find the current value of this bond.

a. 567

b. 576

c. 667

d. 676

Ans - c

Explanation :

Current value of console bond

= Coupon ÷ interest rate

= 60 ÷ 0.09

= Rs. 667

a. 0.890

b. 0.873

c. 0.857

d. 0.842

Ans - c

Solution :

= 1/(1+r)n

= 1/(1.08)^2

= 0.857

2. A console bond of Rs. 10000 is issued at 6%. Coupon current interest rates and 9%. Find out the current value of the console bond.

a. Rs.7660

b. Rs.6760

c. Rs.6667

d. Rs.6676

And :c

Solution :

= 10000*0.06/0.09

= 10000*0.6667

= 6667

3. In case of compound Interest, if compounding is done quarterly, then r is divided by ...

a. 2

b. 3

c. 4

d. 6

Ans - c

4. A jar contains 3 red marbles, 7 green marbles and 10 white marbles. If a marble is drawn at random, What is the probability that marble drawn is white?

a. 2/5

b. 1/2

c. 3/8

d. 10/13

Ans – b

Solution :

Here Red = 3

Green = 7

White = 10

Hence total sample space is (3+7+10)= 20

Out of 20 one ball is drawn n(S) = {c(20,a.} = 20

To find the probability of occurrence of one White marble out of 10 white ball

n(R)={c(10,a.} = 10

Hence P(R) = n(R)/n(S)

= 10/20 = 1/2

5. An investment at 10% is compounded monthly, what shall be the effect interest rate for this?

a. 10.18 %

b. 10.25 %

c. 10.47 %

d. 10.51 %

Ans - c

Solution :

= (1+0.10/12)^12-1

= 10.47

6. What is sampling for groups with considerable variation within but similar to each other called ?

a. cluster

b. stratified

c. systematic

d. random

Ans - a

7. 15 year, 8 % Rs 1000 face value bond is currently trading at Rs 958. The YTM of this bond must be......

a. less than 8%

b. equal to 8%

c. greater than 8%

d. unknown

Ans - c

8. Mr.Ram wants to have Rs 20000 after a year. How much he should deposit in a bank to get this amount if the prevailing rate of interest is 9% ?

a. 17896

b. 18104

c. 18224

d. 18348

Ans - d.

Solution :

20000/1.09

9.MR. Ravi is expected to join a professional course after 03 years from now and he would be needing a sum of Rs.3 lacs at that time. If he wants to save the amt in annual installments and prevailing interest rates are 5%, How much amt he should deposit per annum?

a. 92163

b. 90631

c. 91363

d. 92531

Ans - A

Solution :

= fv*r/(i+r)*{(1+r)^n-1}

= 300000*.05/(1.05){(1.05)^3-1}

= 90163

10. If payments are made/received at the beginning of the period, this Annuity is called as ...

a. Perpetual Annuity

b. Annuity Ordinary

c. Annuity Due

d. Advance Annuity

Ans - c

11. A sack contains 4 black balls 5 red balls. What is probability to draw 1 black ball and 2 red balls in one draw ?

a. 12/21

b. 9/20

c. 10/21

d. 11/20

Ans – c

Solution :

Out of 9, 3 (1 black & 2 red. are expected to be drawn)

Hence sample space

n(S) = 9c3

= 9!/(6!×3!)

= 362880/4320

= 84

Now out of 4 black ball 1 is expected to be drawn hence

nb. = 4c1

= 4

Same way out of 5 red balls 2 are expected be drawn hence

n(R) = 5c2

= 5!/(3!×2!)

= 120/12

= 10

Then P(B U R) = n(B)×n(R)/n(S)

i.e 4×10/84 = 10/21

12. Assume that you have a 6% Coupon console bond. The original face value is Rs. 1000 and the interest rate is 9%. Find the current value of this bond.

a. 567

b. 576

c. 667

d. 676

Ans - c

Explanation :

Current value of console bond

= Coupon ÷ interest rate

= 60 ÷ 0.09

= Rs. 667