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Question Paper Investment Banking and Financial Services – I (261) Part A : Basic Concepts (30 Points) ã ã ã ã 1. This part consists of questions with serial number 1 - 30. Answer all questions. Each question carries one point. Maximum time for answering Part A is 30 Minutes. Which of the following is/are true with respect to commercial paper and certificate of deposits? I. II. III. IV. Both are issued by corporates Both can be invested by individuals and corporates Both can be bought back by t
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1 Question Paper Investment Banking and Financial Services \u2013 I (261) Part A : Basic Concepts (30 Points) \u2022This part consists of questions with serial number 1 - 30. \u2022Answerall questions. \u2022Each question carries one point. \u2022Maximum time for answering Part A is 30 Minutes. 1.Which of the following is/aretrue with respect to commercial paper and certificate of deposits? I. Both are issued by corporates II. Both can be invested by individuals and corporates III. Both can be bought back by the issuer IV. A CP can be issued with a minimum size of Rs.5 lakhs and multiples of Rs.1 lakh, whereas a CD can be issued with a minimum size of Rs.5 lakhs and in multiples of Rs.5 lakhs a. Only (II) above b. Only (IV) above c. Both (II) and (IV) above d. (II), (III) and (IV) above e. All (I), (II), (III), (IV) above. 2.Which of the following model does not assume that lease is a substitute of debt? a. Weingartner\u2019s Model b. Equivalent Loan Model c. Bower-Herringer-Williamson Model d. Bower Model e. None of the above. 3.Reshma Rayons Ltd. gives an offer of rights issue to its shareholders on November 24, 2002. The issue should be open atleast till a. December 01, 2002 b. December 04, 2002 c. December 09, 2002 d. December 24, 2002 e. January 24, 2003. 4.Standard Cable Company Ltd. recently issued commercial paper for Rs.50 lakhs, which was rated by ICRA as \u2018having adequate safety but any adverse change in business/economic conditions could hamper the fundamental strength\u2019. The rating given by ICRA was a. MC b. MB c. A4 d. P4 e. A5. 5.ECBs over $20 million raised by 100% Export Oriented Units (EOUs) should have a minimum average maturity of a. 3 years b. 4 years c. 5 years d. 6 years e. 7 years.2 6.Integrity Financial Services Ltd. is the Registrar to a particular IPO. It has not send the draft prospectus/offer letter to SEBI before filing with the ROC/Stock Exchange. The penalty points awarded by SEBI for this default is a. 1 b. 2 c. 3 d. 4 e. 5. 7.Elegant Emeralds have taken a machine worth Rs.1000000 in hire purchase from Fabulous Finance Limited at the following terms Rate of interest 14% flat Repayment period 4 years Frequency of payment Monthly in arrear Down payment 25% If after paying the 30th installment Elegant Emeralds want to repay the loan and purchase the machine, what interest rebate it can enjoy according to the Rule of 78 method? a. Rs.50000 b. Rs.56965 c. Rs.60000 d. Rs.61071 e. Rs.62465. 8.Prudential Factoring Services Ltd. discounts the L/C backed bills of its clients at 25% p.a. The effective rate of interest per annum of such a bill of usance period 90 days (assuming 360 days a year) is_______ %. a. 25.00 b. 26.37 c. 26.67 d. 27.44 e. 29.45. 9.Suravi Hotel Groups Public Ltd.\u2019s share of face value Rs.10 is trading at BSE at Rs.350 and NSE at Rs.360. The General Reserves and the Share Premium Account are Rs.400 crore and Rs.250 crore respectively. If the total number of outstanding equity shares of the company is 10 lakhs, the maximum possible stock split ratio as per the latest SEBI Guidelines is a. 1: 4 (4 shares for every one share) b. 1: 5 (5 shares for every one share) c. 1: 6 (6 shares for every one share) d. 1:10 (10 shares for every one share) e. The maximum possible stock split ratio cannot be computed from the available data. 10.The interest rate in a REPO deal is a. Specified by RBI in the Monetary Policy. b. Stipulated time to time by the SBI c. Mutually decided by BSE and NSE for every month. d. Mutually negotiated by the buyer and the seller depending on the term, amount and the prevailing call money and the term money rates e. Stipulated for every fortnight by SEBI. 11.EXIM Bank is issuing 6 months CDs worth Rs.25 lakh each at a price of Rs.24,86,880. The stamp duty payable is a. Rs.3108.60 by the subscriber b. Rs.3125.00 by the issuer c. Rs.6217.20 by the subscriber d. Rs.6250.00 by the issuer e. Rs.9375.00 by the subscriber.3 12. If an IPO is under-priced, which of the following can be considered as consequences/implications of the same? I. The company looses the opportunity to raise more funds II. Under pricing would give less returns to the investor III. Under pricing results in lower net worth on an increased equity. a. Only (II) above b. Only (III) above c. Both (I) and (III) above d. Both (II) and (III) above e. All (I), (II), and (III) above 13.The maximum amount of brokerage payable for soliciting an 18-month public deposit of Rs.100000 is a. Rs.1000 b. Rs.1500 c. Rs.2000 d. Rs.2500 e. No such maximum limit is specified. 14.A Moonshot is a. A stock that is favorite among the traders b. An IPO that makes disproportionately large gains in the stock price on the first day of trading c. A situation where the activity in a market is unusually low due to the anticipation of a crisis by the investors d. A stock which has the largest market capitalization in the stock exchange on a particular day. e. A stock whose bid price is equal to the ask price, that is the bid-ask spread is equal to zero. 15.In a year, a satellite dealer shall commit to generate outright turnover of Central Government securities including T-Bills ofnot less than a. Rs.0.5 crore b. Rs.1.0 crore c. Rs.10.0 crore d. Rs.25.0 crore e. Rs.30.0 crore. 16.Which of the following is/arenot a features of a finance lease? a. The lease is not fully amortized b. The lease is usually cancelled at a short notice c. The lessor is responsible for the insurance and maintenance of the asset d. All of the above e. None of the above. 17.Consider the following data: Value of asset leased Rs.50 lakhs Lease rentals Rs.35 ptpm Lease period 3 years Payment pattern Payable monthly in advance The add-on yield on the above transaction is a. 8.00% b. 8.33% c. 8.67% d. 9.00% e. 9.33%.4 18.Which of the following is/aretrue regarding accounting treatment of a hire purchase contract? I. In the books of the finance company, the hire purchase installments receivable is shown as ‘Stock on Hire’ under current asset II. In the books of the hirer the capital content of the hire purchase installment is recorded as a liability III. In the books of the hirer depreciation is charged on the capital content of the hire purchase installments. a. Only (I) above b. Only (II) above c. Only (III) above d. Both (I) and (II) above e. Both (I) and (III) above. 19.In hire purchase transactions, the service tax payable by the hire purchase companies on the interest earned is a. 2.50% b. 4.50% c. 5.00% d. 6.50% e. 7.50%. 20.Creative Consumer Finance Ltd. is offering a loan of Rs.25000 for 2 years for a monthly installment of Rs.1200. The effective rate of interest by approximation method is a. 14.59% b. 15.20% c. 16.00% d. 29.18% e. 30.40%. 21.The factoring in which a commercial bank participates in the transaction by providing advance to the client against the reserves maintained by the factor is known as a. Maturity Factoring b. Full Factoring c. Advance factoring d. Invoice Factoring e. Bank Participation Factoring. 22.Assertive Finance Ltd. discounts L/C backed bill with a usance period of 60 days at the rate of 20%. The effective rate of interest is a. 19.33% b. 20.00% c. 20.69% d. 21.74% e. 22.57%. 23.Which of the following is/aretrue regarding factoring and forfaiting? I. In both factoring and forfaiting advances are medium term in nature II. Factoring can be structured either as recourse or non-recourse arrangement but forfaiting can be structured only as non-recourse arrangement III. Factor does the credit rating of the counter party if required but the forfaiting bank relies on the credibility of the avalling bank. a. Only (I) above b. Both (I) and (II) above c. Both (I) and (III) above d. Both (II) and (III) above e. All (I), (II) and (III) above.
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