SOLVED CAIIB COMBINED PAPER 12:
1. A bond that has no maturity and pays a fixed coupon (or rate of interest) is called ...
a. Long term bond
b. Perpetual bonds
c. Console bonds
d. Non-repayable bonds
Ans - C
2. 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
3. An annuity consists of monthly repayments of Rs. 600 made over 20 years and if rate is 14%. What is the future value of the annuity?
a. 781046
b. 718146
c. 781146
d. 716814
Ans - c
Explanation :
Apply FV formula to get the Answer
Here
R = 14% / 12 = 0.01166
T = 20 × 12 = 240
FV = 781146
4. Xyz purchased machinery of Rs. 100000. The rate of depreciation is 10%. At WDV method, what is the average rate of depreciation for 4 years?
a. 12.76
b. 13.76
c. 14.76
d. 15.76
Ans - B
Explanation :
Here,
P = 100000
R = 10%
T = 5 yrs
FV = P*(1-R)^T
So,
FV = 100000*(1-0.1)^4
= 65610
So, amount of depreciation
= 100000 – 65610
= 34390
Average rate of depreciation
= (34390 ÷100000) * (4÷10) %
= 13.76%
5. A bond is issued with a face value of 1000 that pays a Rs. 25 Coupon semi-annually. Find its Coupon rate.
a. 4
b. 5
c. 6
d. 7
Ans - b
Explanation :
Coupon = Face Value × Coupon Rate
25 = 1000 × CR ÷ 2
So, CR = 5%
6. The standard error of the mean for a sample size of two or more is ...................................
a. Always greater than the standard deviation of the population
b. Generally greater than the standard deviation of the population
c. Usually, the standard deviation of the population
d. None of these
Ans - c
7. A person wants to receive Rs. 1250 every quarter for 5 years @ 12% roi. How much he should invest now?
a. 18975
b. 18795
c. 18579
d. 18597
Ans - d
Explanation :
Here,
P = 1250
R = 12% quarterly = 3% p.a.
T = 5 yrs = 20 quarters
PV = P / R * [(1+R)^T - 1]/(1+R)^T
So, PV = (1250 ÷ 0.03) * (1.0320 – 1) ÷ 1.0320
= 18597
8. You are receiving Rs. 1000 every year for the next 5 years at the beginning of the period and you invest each payment @ 5%. How much you would at the end of the 5-year period?
a. 5082
b. 5280
c. 5820
d. 5802
Ans - d
Explanation :
Apply FV formula to get the Answer = 5802
9. A 2-year bond offers a yield of 6% and a 3-year bond offers a yield of 7.5%. Under the expectation theory, what should be the yield on a 1-year bond in 2 years?
a. 9.85
b. 10.56
c. 10.96
d. 11.06
Ans - b
Explanation :
(1+7.5%)^3 = (1+6%)^2 × (1+r)^1
R = 10.56%
10. If prices double, what happens to real value of rupee?
a. remains same
b. doubles
c. halves
d. changes in unlike proportions
Ans - c
11. Ranjit borrowed an amount of Rs. 50000 for 8 years @ 18% roi. What shall be monthly payment?
a. 986
b. 968
c. 896
d. 869
Ans - a
Explanation :
Here,
P = 50000
R = 18% = 18 % ÷ 12 = 0.015% monthly
T = 8 yrs = 96 months
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = 50000 * 0.015 * 1.01596 ÷ (1.01596 – 1
= 986
12. X wants to borrow Rs. 25000 immediately and another Rs. 20000 after a period of 2 years @ 10% roi. He wants to pay it in monthly installments for 5 years. Calculate the amount of monthly payment.
a. 978
b. 987
c. 897
d. 879
Ans - d
Explanation :
Here,
First find PV of 20000 for 2 years @ 10%.
Here, t = 2*12 = 24 months and r = 10% ÷ 12 = 0.00833
PV = P / (1+R)^T
So,
PV = 20000 ÷ (1+0.0083)^24
= 16388.07
So, total amount = 25000 + 16388.07 = 41388.07
Now,
P = 41388.07,
R = 10% ÷ 12 = 0.00833,
T = 5 * 12 = 60 months
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = (41388.07 * 0.00833) * {(1.0083)^60 ÷ (1.0083)^60 – 1)}
= 879
a. Long term bond
b. Perpetual bonds
c. Console bonds
d. Non-repayable bonds
Ans - C
2. 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
3. An annuity consists of monthly repayments of Rs. 600 made over 20 years and if rate is 14%. What is the future value of the annuity?
a. 781046
b. 718146
c. 781146
d. 716814
Ans - c
Explanation :
Apply FV formula to get the Answer
Here
R = 14% / 12 = 0.01166
T = 20 × 12 = 240
FV = 781146
4. Xyz purchased machinery of Rs. 100000. The rate of depreciation is 10%. At WDV method, what is the average rate of depreciation for 4 years?
a. 12.76
b. 13.76
c. 14.76
d. 15.76
Ans - B
Explanation :
Here,
P = 100000
R = 10%
T = 5 yrs
FV = P*(1-R)^T
So,
FV = 100000*(1-0.1)^4
= 65610
So, amount of depreciation
= 100000 – 65610
= 34390
Average rate of depreciation
= (34390 ÷100000) * (4÷10) %
= 13.76%
5. A bond is issued with a face value of 1000 that pays a Rs. 25 Coupon semi-annually. Find its Coupon rate.
a. 4
b. 5
c. 6
d. 7
Ans - b
Explanation :
Coupon = Face Value × Coupon Rate
25 = 1000 × CR ÷ 2
So, CR = 5%
6. The standard error of the mean for a sample size of two or more is ...................................
a. Always greater than the standard deviation of the population
b. Generally greater than the standard deviation of the population
c. Usually, the standard deviation of the population
d. None of these
Ans - c
7. A person wants to receive Rs. 1250 every quarter for 5 years @ 12% roi. How much he should invest now?
a. 18975
b. 18795
c. 18579
d. 18597
Ans - d
Explanation :
Here,
P = 1250
R = 12% quarterly = 3% p.a.
T = 5 yrs = 20 quarters
PV = P / R * [(1+R)^T - 1]/(1+R)^T
So, PV = (1250 ÷ 0.03) * (1.0320 – 1) ÷ 1.0320
= 18597
8. You are receiving Rs. 1000 every year for the next 5 years at the beginning of the period and you invest each payment @ 5%. How much you would at the end of the 5-year period?
a. 5082
b. 5280
c. 5820
d. 5802
Ans - d
Explanation :
Apply FV formula to get the Answer = 5802
9. A 2-year bond offers a yield of 6% and a 3-year bond offers a yield of 7.5%. Under the expectation theory, what should be the yield on a 1-year bond in 2 years?
a. 9.85
b. 10.56
c. 10.96
d. 11.06
Ans - b
Explanation :
(1+7.5%)^3 = (1+6%)^2 × (1+r)^1
R = 10.56%
10. If prices double, what happens to real value of rupee?
a. remains same
b. doubles
c. halves
d. changes in unlike proportions
Ans - c
11. Ranjit borrowed an amount of Rs. 50000 for 8 years @ 18% roi. What shall be monthly payment?
a. 986
b. 968
c. 896
d. 869
Ans - a
Explanation :
Here,
P = 50000
R = 18% = 18 % ÷ 12 = 0.015% monthly
T = 8 yrs = 96 months
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = 50000 * 0.015 * 1.01596 ÷ (1.01596 – 1
= 986
12. X wants to borrow Rs. 25000 immediately and another Rs. 20000 after a period of 2 years @ 10% roi. He wants to pay it in monthly installments for 5 years. Calculate the amount of monthly payment.
a. 978
b. 987
c. 897
d. 879
Ans - d
Explanation :
Here,
First find PV of 20000 for 2 years @ 10%.
Here, t = 2*12 = 24 months and r = 10% ÷ 12 = 0.00833
PV = P / (1+R)^T
So,
PV = 20000 ÷ (1+0.0083)^24
= 16388.07
So, total amount = 25000 + 16388.07 = 41388.07
Now,
P = 41388.07,
R = 10% ÷ 12 = 0.00833,
T = 5 * 12 = 60 months
EMI = P * R * [(1+R)^T/(1+R)^T-1)]
EMI = (41388.07 * 0.00833) * {(1.0083)^60 ÷ (1.0083)^60 – 1)}
= 879