Pro on CD.CP

Pro on CD.CP - IBFS(CA) Problems on CPs, CDs, and Bonds...

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IBFS(CA) Problems on CPs, CDs, and Bonds (Concepts and Formulae) A. Formulae for CPs : (i) Rate of Return (ROR) on CP to the Investor : Par Value–Purchase Price 12 ROR = ---------------------------------- x --------------- x 100 Purchase Price No. of months to maturity F (ii) Issue Price (P) = ------------------------------- 1 + [(i/100) x (N/365)] Where, F = Face Value; i = Effective interest p.a. N = Usance period in no. of days Effective Interest Rate (i) = (1+ Nominal rate) n - 1 Where, n = No. of Compoundings (i ii) Cost of Funds to the CPs issuing Firm: Cost of Funds (%) = Effective Interest Rate + Brokerage + Rating Charges + Stamp Duty Also, Interest = Face Value of CP – Issue Price 1
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B. Formulae for CDs: F (i) Issue Price (P) = ---------------------------- 1 + [(i/100) x (N/365)] Where, F = Face Value; i = Effective interest p.a. N = Usance period in no. of days (ii) Cost of Funds to the Bank = Effective Interest rate + Stamp Duty C. Formulae for Bonds: Face Value Price of the Bond (P) = -----------------
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This note was uploaded on 01/28/2011 for the course FIN 315 taught by Professor Welker during the Spring '09 term at IUP.

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Pro on CD.CP - IBFS(CA) Problems on CPs, CDs, and Bonds...

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