0807 FM (CFA550) - Question paper Financial Markets...

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1 Question paper Financial Markets (CFA550): July 2008 Answer all 74 questions. Marks are indicated against each question. Total Marks : 100 1. Which of the following functions of the financial system ensures a smooth flow of funds from savings to investments in order to stabilize the economy? (a) Savings function (b) Policy function (c) Credit function (d) Financing function (e) Investment function. (1 mark) <Answer> 2. Which of the following statements is/are true with respect to the types of warrants? I. Puttable warrants confer a right on the investor to sell the warrant back to the company at a fixed price before the expiry of a fixed period. II. Detachable warrants are issued separately and not as a part of a bond issue and the holder has an option of converting the warrant into debt or equity. III. Wedding warrants are attached to the host debentures and can be exercised only if the host debenture is surrendered. (a) Only (I) above (b) Only (II) above (c) Both (I) and (II) above (d) Both (I) and (III) above (e) All (I), (II) and (III) above. (1 mark) <Answer> 3. Which of the following provisions is attached to the collar feature of Floating Rate Notes (FRNs)? (a) Provision for calling back the FRNs by the issuer on pre-specified date and price (b) Provision for redeeming the FRNs by the investor on pre-specified date and price (c) Provision for payment of maximum coupon rate during rising interest rates (d) Provision for payment of minimum coupon rate during falling interest rates (e) Provision for both cap and floor feature to attract the investors. (1 mark) <Answer> 4. Which of the following is an objective of the lender? (a) Minimum terms and conditions attached with the usage of funds (b) Minimum risk with the investment (c) Minimum lead time in obtaining the required funds (d) Minimum monitoring and interference (e) Access to funds up to the desired period of time. (1 mark) <Answer> 5. Which of the following statements is/are not true with respect to Semi-Government dated securities? I. These securities usually carry a higher coupon rate than their counterpart state government dated securities. II. Interest payments and transfers of these securities are handled by the RBI. III. The price quotations for these securities are reported to stock exchange for inclusion in the official quotations list by licensed dealers. (a) Only (I) above (b) Only (II) above (c) Both (I) and (II) above (d) Both (II) and (III) above (e) All (I), (II) and (III) above. (1 mark) <Answer>
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2 6. Duration is a generic concept that indicates a bond’s response to a change in interest rates. In this context, which of the following statements is/are true ? I. Modified duration assumes that the cash flows change with a change in the yield. II.
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This note was uploaded on 07/20/2010 for the course ICFAI CFA taught by Professor Cfa during the Fall '09 term at Indian School of Business.

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0807 FM (CFA550) - Question paper Financial Markets...

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