1) Required rate of return > Coupon rate, the bond will be valued at
a. Premium
b. Par value
c. Discount
d. None of the above
Answer
Explanation

ANSWER: Discount
Explanation: No explanation is available for this question!


2) Mr. X takes a loan of Rs 50,000 from HDFC Bank. The rate of interest is 10% per annum. The first installment will be paid at the end of year 5. Determine the amount of equal annual installments if Mr. X wishes to repay the amount in five installments.
a. Rs 19500
b. Rs 19400
c. Rs 19310
d. None of the above
Answer
Explanation

ANSWER: Rs 19310
Explanation: No explanation is available for this question!


3) If nominal rate of return is 10% per annum and annual effective rate of interest is 10.25% per annum, determine the frequency of compounding:
a. 1
b. 2
c. 3
d. None of the above
Answer
Explanation

ANSWER: 2
Explanation: No explanation is available for this question!


4) A portfolio having two risky securities can be turned risk less if
a. The securities are completely positively correlated
b. If the correlation ranges between zero and one
c. The securities are completely negatively correlated
d. None of the above
Answer
Explanation

ANSWER: The securities are completely negatively correlated
Explanation: No explanation is available for this question!


5) Heterogeneous cash flows can be made comparable by
a. Discounting technique
b. Compounding technique
c. Either a or b
d. None of the above
Answer
Explanation

ANSWER: Either a or b
Explanation: No explanation is available for this question!


6) For a bond YTM is always equal to coupon rate.
a. True
b. False
Answer
Explanation

ANSWER: False
Explanation: No explanation is available for this question!


7) In a variable growth model, the dividend is believed to grow at a constant pace forever after an initial growth period.
a. True
b. False
Answer
Explanation

ANSWER: True
Explanation: No explanation is available for this question!


8) Value of a bond just depends on the interest payment it offers.
a. True
b. False
Answer
Explanation

ANSWER: False
Explanation: No explanation is available for this question!


9) A bond is said to be issued at premium when
a. Coupon rate > Required returns
b. Coupon rate = Required returns
c. Coupon rate < Required returns
d. None of the above
Answer
Explanation

ANSWER: Coupon rate > Required returns
Explanation: No explanation is available for this question!


10) If the coupon rate is constant, the value of bond when close to maturity will be
a. Issued value
b. Par value
c. Redemption value
d. All of the above
Answer
Explanation

ANSWER: Redemption value
Explanation: No explanation is available for this question!

