CAIIB ABM MIX

Meenakshi:
The supply of a product does not depend on ......
  a. labour costs
b. the number of sellers in the market
 c. consumers tastes
d. existing technology

We should assume ytm 9 or 10..
Since market price is less than face value, ytm will be more than coupon rate (which is 8 here ).
And substitute in 800*pvifa(9%,6)+10000*pvif(9%,6)
Similarly for 10.

YTM =coupon rate +(10-9)+((value from lowest ytm-market vue))/((value from lowest ytn-Value from highest ytm))

There are 2 formulae for FV and PV

PV = FV/(1+rn)
PV=FV/(1+r)^n

ABC co has following data as on 31-03-2018 Value in cr

Paid up capital (for 2 crore share with face value of Rs 10) - 20
Reserve - 60
Long term Loans - 80
PBIDT - 50
Paid interest - 12
Depreciation - 10
Tax - 08
Price earning ratio - 10

On this basis, ans the following qtns

1. Its net profit would be ......

a. Rs. 38 Cr
b. Rs. 40 Cr
c. Rs. 42 Cr
d. Rs. 20 Cr

Ans – d

PBIDT-I-D-T
= 50-12-10-8
= 20 cr
.............................................

2. Book value of shares of the company as on 31-03-2018

a. Rs. 10 cr
b. Rs. 30 cr
c. Rs. 40 cr
d. Rs. 80 cr

Ans – c

Book value of shares = (paid up capital + reserve)/no of shares
= (20+60)/2
= 40
.............................................

3. The earning per share would be ......

a. Rs. 40 cr
a. Rs. 30 cr
a. Rs. 20 cr
a. Rs. 10 cr

Ans – d

EPS=NPAT/paid up capital* face value
= 20/20*10
= 10
.............................................

4. Market price of the share of the co......

a. Rs. 50 cr
a. Rs. 100 cr
a. Rs. 200 cr
a. Rs. 300 cr

Ans – b

Market price = PER * EPS
= 10*10
= 100
.............................................
Based on the below given data of a bank’s branch as on 31.03.2017 (in Lakhs), answer the following questions.

A/c - Bal - Security - NPA Date
A1 - 120 - 40 - 30.09.2016
A2 - 100 - 60 - 30.07.2014
A3 - 160 - 80 - 30.06.2015
A4 - 120 - 100 - 31.08.2016
A5 - 150 - 150 - 31.07.2013
A6 - 160 - 0 - 31.10.2015
A7 - 200 - 120 - 30.08.2014
A8 - 180 - 140 - 31.05.2015

1. What is the provision required against account Al?

a. 20
b. 22
c. 24
d. 26

Ans - d
.........................................

2. What is the provision required against account A2?

a. 55
b. 58
c. 64
d. 72

Ans - c
.........................................

3. What is the provision required against account A3?

a. 96
b. 100
c. 104
d. 160

Ans - b
.........................................

4. What is the provision required against account A4?

a. 14
b. 20
c. 24
d. 25

Ans - b
.........................................

5. What is the provision required against account A5?

a. 37.5
b. 60
c. 75
d. 150

Ans - b
.........................................

6. What is the provision required against account A6?

a. 40
b. 64
c. 128
d. 160

Ans - d
.........................................

7. What is the provision required against account A7?

a. 40
b. 64
c. 128
d. 160

Ans - c
.........................................

8. What is the provision required against account A8?

a. 68
b. 75
c. 82
d. 96

Ans - b
.........................................

Explanation

1. The A/c is NPA on 30.09.2016. So, it is in Sub-Standard category and the provision for Secured-15% and Unsecured-25%

Secured Amount - 40
Unsecured Amount - 80

Provision Required = 40*15% + 80*25%
= 6 + 20
= 26 Lakhs
.........................................

2. The A/c is NPA on 30.07.2014. So, it is in Doubtful (D2) category and the provision for Secured-40% and Unsecured-100%

Secured Amount - 60
Unsecured Amount - 40

Provision Required = 60*40% + 40*100%
= 24 + 40
= 64 Lakhs
.........................................

3. The A/c is NPA on 30.06.2015. So, it is in Doubtful (D1) category and the provision for Secured-25% and Unsecured-100%

Secured Amount - 80
Unsecured Amount - 80

Provision Required = 80*25% + 80*100%
= 20 + 80
= 100 Lakhs
.........................................

4. The A/c is NPA on 31.08.2016. So, it is in Sub-Standard category and the provision for Secured-15% and Unsecured-25%

Secured Amount - 100
Unsecured Amount - 20

Provision Required = 100*15% + 20*25%
= 15 + 5
= 20 Lakhs
.........................................

5. The A/c is NPA on 31.07.2013. So, it is in Doubtful (D2) category and the provision for Secured-40% and Unsecured-100%

Secured Amount - 150
Unsecured Amount - 0

Provision Required = 150*40% + 0*100%
= 60 + 0
= 60 Lakhs
.........................................

6. The A/c is NPA on 31.10.2015. So, it is in Doubtful (D1) category and the provision for Secured-25% and Unsecured-100%

Secured Amount - 0
Unsecured Amount - 160

Provision Required = 0*25% + 160*100%
= 0 + 160
= 160 Lakhs

.........................................

7. The A/c is NPA on 30.08.2014. So, it is in Doubtful (D2) category and the provision for Secured-40% and Unsecured-100%

Secured Amount - 120
Unsecured Amount - 80

Provision Required = 120*40% + 80*100%
= 48 + 80
= 128 Lakhs
.........................................

8. The A/c is NPA on 31.05.2015. So, it is in Doubtful (D1) category and the provision for Secured-25% and Unsecured-100%

Secured Amount - 140
Unsecured Amount - 40

Provision Required = 140*25% + 40*100%
= 35 + 40
= 75 Lakhs

CAIIB (Summary Formulas) **MOST IMP
Go through all of them to understand the concepts clear for both ABM and BFM.
1. Raw material Turnover Ratio = Cost of RM used / Average stock of R M

2. SIP Turnover = Cost of Goods manufactured / Average stock of SIP

3. Debt Collection period = No. days or months or Weeks in a year/Debt Turnover Ratio.

4. Average Payment Period = No. days or months or Weeks in a year/Creditors Turnover
Ratio.
5. Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory.
6. Debtors Turnover Ratio = Net Credit Sales / Average Debtors.
7. Creditors Turnover Ratio = Net Credit Purchases / Average Credits.
8. Defensive Interval Ratio = Liquid Assets / Projected Daily Cash Requirement
9. Projected daily cash requirement = Projected operating cash expenses / 365.
10. Debt Equity Ratio = Long Term Debt / Equity.
11. Debt Equity Ratio = Total outside Liability / Tangible Net Worth.
12. Debt to Total Capital Ratio = Total Debts or Total Assets/(Permanent Capital + Current
Liabilities)
13. Interest Coverage Ratio = EBIT / Interest.
14. Dividend Coverage Ratio = N. P. after Interest & Tax / Preferential dividend
15. Gross Profit Margin = Gross Profit / Net Sales * 100
16. Net Profit Margin = Net Profit / Net Sales * 100
17. Cost of Goods Sold Ratio = Cost of Goods Sold / Net Sales * 100.
18. Operating Profit Ratio = Earnings Before Interest Tax / Net Sales * 100
19. Expenses Ratio or Operating Ratio = Expenses / Net Sales * 100
20. Net Profit Ratio = Net Profit After interest and Tax / Net Sales * 100
21. Operating Expenses Ratio = (Administrative + Selling expenses) / Net Sales * 100
22. Administrative Expenses Ratio =(Administrative Expenses / Net Sales ) * 100
23. Selling Expenses Ratio =(Selling Expenses / Net Sales ) * 100
24. Financial Expenses Ratio = ( Financial Expenses / Net Sales ) * 100
25. Return on Assets = Net Profit After Tax / Total Assets.
26. Total Assets = Net Fixed Assets + Net Working Capital.
27. Net Fixed Assets = Total Fixed Assets – Accumulated Depreciation.
28. Net Working Capital = ( CA –CL ) – ( Intangible Assets + Fictitious Assets + Idle Stock
+ Bad Debts )
29. Return on Capital Employed = Net Profit Before Interest and Tax / Average Capital
Employed.
30. Average Capital employed = Equity Capital + Long Term Funds provided by Owners &
Creditors at the beginning & at the end of the accounting period divided by two.
31. Return on Ordinary Share Holders Equity = (NPAT – Preferential Dividends) / Average
Ordinary Share Holders Equity or Net Worth.
32. Earnings Per Share = Net Profit After Taxes and Preferential dividends / Number of
Equity Share.
33. Dividend per Share = Net Profit After Taxes and distributable dividend / Number of
Equity Shares.
34. Dividend Pay Out Ratio = Dividend per Equity Share / Earnings per Equity Share.
35. Dividend Pay Out Ratio = Dividend paid to Equity Share holders / Net Profit available
for Equity Share Holders.
36. Price Earning Ratio = Market Price per equity Share / Earning per Share.
37. Total Asset Turnover = Cost of Goods Sold / Average Total Assets.
38. Fixed Asset Turnover = Cost of Goods Sold / Average Fixed Assets.
39. Capital Turnover = Cost of Goods Sold / Average Capital employed.
40. Current Asset Turnover = Cost of Goods Sold / Average Current Assets.
41. Working Capital Turnover = Cost of Goods Sold / Net Working Capital.
42. Return on Net Worth = ( Net Profit / Net Worth ) * 100
43. DSCR = Profit after Tax & Depreciation + Int. on T L & Differed Credit + Lease
Rentals if any divided by Repayment of Interest & Installments on T L & Differed Credits +
Lease Rentals if any.
44. Factory Cost = Prime cost + Production Overheads.
45. Cost of Goods Sold = Factory Cost + Selling, distribution & administrative overheads
46. Contribution = Sales – Marginal Costs.
47. Percentage of contribution to sales = ( Contribution / Sales ) * 100
48. Break Even Analysis = F / ( 1 – VC / S )
F = Fixed costs, VC = Total variable operating costs & S = Total sales revenue
49. Break Even Margin or Margin of Safety = Sales – Break Even Point / Sales.
50.

Cash Break Even = F – N / P – R or F – N / 1 – ( VC / S )
51. BEP = Fixed Costs / Contribution per unit.
52. Sales volume requires = Fixed cost + Required profit / Contribution per unit.
53. BEP in Sales = ( Fixed Costs / Contribution per unit ) * Price per unit.
54. Contribution Sales Ratio = ( Contribution per unit / Sale price per unit ) * 100
55. Level of sales to result in target profit after Tax = (Target Profit) / (1 – Tax rate /
Contribution per unit)
56. Level of sales to result in target profit = (Fixed Cost + Target profit) * sales price per
unit Contribution per unit.
57. Net Present Value = - Co + C1 / (1 + r)
58. Future expected value of a present cash flow = Cash Flow ( 1 + r ) ^ t
59. Present value of a simple future cash flow = Cash Flow / (1 + r) ^ t
60. The Discount Factor = 1 / (1 + r) ^ t
61. Notation used internationally for PV of an annuity is PV ( A, r, n )
62. Notation used internationally for FV of an annuity is FV ( A, r, n )
63. The effective annual rate = ( 1 + r ) ^ t – 1 or (1 + (r / N) ) – 1 )
N = Number of times compounding in a year
64. PV of end of period Annuity = A { (1- (1 / (1+r) ^ n) / r
65. CR = CA : CL
66. Net Worth = CA - CL
67. DER = TL/TNW or debt/equity or TL/equity
68. Price Elasticity of Supply = (% change in quantity supplied/(% change in price)
69. PV = P / R * [(1+R)^T - 1]/(1+R)^T
70. PV = P / (1+R)^T
71. FV = P * (1 + R)^T
72. FV = P*(1-R)^T
73. FV = P / R * [(1+R)^T - 1]
74. FV = P / R * [(1+R)^T - 1] * (1+R)
75. EMI = P * R * [(1+R)^T/(1+R)^T-1)]
76. FV of annuity = A/r ×{(1+r)^n-1}
77. Bond Price = (1/(1+R)^t)((coupon*((1+R)^t-1)/R)+Face Value)

CAIIB (Summary Formulas) **MOST IMP
Go through all of them to understand the concepts clear for both ABM and BFM.
1. Raw material Turnover Ratio = Cost of RM used / Average stock of R M

2. SIP Turnover = Cost of Goods manufactured / Average stock of SIP

3. Debt Collection period = No. days or months or Weeks in a year/Debt Turnover Ratio.

4. Average Payment Period = No. days or months or Weeks in a year/Creditors Turnover
Ratio.
5. Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory.
6. Debtors Turnover Ratio = Net Credit Sales / Average Debtors.
7. Creditors Turnover Ratio = Net Credit Purchases / Average Credits.
8. Defensive Interval Ratio = Liquid Assets / Projected Daily Cash Requirement
9. Projected daily cash requirement = Projected operating cash expenses / 365.
10. Debt Equity Ratio = Long Term Debt / Equity.
11. Debt Equity Ratio = Total outside Liability / Tangible Net Worth.
12. Debt to Total Capital Ratio = Total Debts or Total Assets/(Permanent Capital + Current
Liabilities)
13. Interest Coverage Ratio = EBIT / Interest.
14. Dividend Coverage Ratio = N. P. after Interest & Tax / Preferential dividend
15. Gross Profit Margin = Gross Profit / Net Sales * 100
16. Net Profit Margin = Net Profit / Net Sales * 100
17. Cost of Goods Sold Ratio = Cost of Goods Sold / Net Sales * 100.
18. Operating Profit Ratio = Earnings Before Interest Tax / Net Sales * 100
19. Expenses Ratio or Operating Ratio = Expenses / Net Sales * 100
20. Net Profit Ratio = Net Profit After interest and Tax / Net Sales * 100
21. Operating Expenses Ratio = (Administrative + Selling expenses) / Net Sales * 100
22. Administrative Expenses Ratio =(Administrative Expenses / Net Sales ) * 100
23. Selling Expenses Ratio =(Selling Expenses / Net Sales ) * 100
24. Financial Expenses Ratio = ( Financial Expenses / Net Sales ) * 100
25. Return on Assets = Net Profit After Tax / Total Assets.
26. Total Assets = Net Fixed Assets + Net Working Capital.
27. Net Fixed Assets = Total Fixed Assets – Accumulated Depreciation.
28. Net Working Capital = ( CA –CL ) – ( Intangible Assets + Fictitious Assets + Idle Stock
+ Bad Debts )
29. Return on Capital Employed = Net Profit Before Interest and Tax / Average Capital
Employed.
30. Average Capital employed = Equity Capital + Long Term Funds provided by Owners &
Creditors at the beginning & at the end of the accounting period divided by two.
31. Return on Ordinary Share Holders Equity = (NPAT – Preferential Dividends) / Average
Ordinary Share Holders Equity or Net Worth.
32. Earnings Per Share = Net Profit After Taxes and Preferential dividends / Number of
Equity Share.
33. Dividend per Share = Net Profit After Taxes and distributable dividend / Number of
Equity Shares.
34. Dividend Pay Out Ratio = Dividend per Equity Share / Earnings per Equity Share.
35. Dividend Pay Out Ratio = Dividend paid to Equity Share holders / Net Profit available
for Equity Share Holders.
36. Price Earning Ratio = Market Price per equity Share / Earning per Share.
37. Total Asset Turnover = Cost of Goods Sold / Average Total Assets.
38. Fixed Asset Turnover = Cost of Goods Sold / Average Fixed Assets.
39. Capital Turnover = Cost of Goods Sold / Average Capital employed.
40. Current Asset Turnover = Cost of Goods Sold / Average Current Assets.
41. Working Capital Turnover = Cost of Goods Sold / Net Working Capital.
42. Return on Net Worth = ( Net Profit / Net Worth ) * 100
43. DSCR = Profit after Tax & Depreciation + Int. on T L & Differed Credit + Lease
Rentals if any divided by Repayment of Interest & Installments on T L & Differed Credits +
Lease Rentals if any.
44. Factory Cost = Prime cost + Production Overheads.
45. Cost of Goods Sold = Factory Cost + Selling, distribution & administrative overheads
46. Contribution = Sales – Marginal Costs.
47. Percentage of contribution to sales = ( Contribution / Sales ) * 100
48. Break Even Analysis = F / ( 1 – VC / S )
F = Fixed costs, VC = Total variable operating costs & S = Total sales revenue
49. Break Even Margin or Margin of Safety = Sales – Break Even Point / Sales.
50.

Cash Break Even = F – N / P – R or F – N / 1 – ( VC / S )
51. BEP = Fixed Costs / Contribution per unit.
52. Sales volume requires = Fixed cost + Required profit / Contribution per unit.
53. BEP in Sales = ( Fixed Costs / Contribution per unit ) * Price per unit.
54. Contribution Sales Ratio = ( Contribution per unit / Sale price per unit ) * 100
55. Level of sales to result in target profit after Tax = (Target Profit) / (1 – Tax rate /
Contribution per unit)
56. Level of sales to result in target profit = (Fixed Cost + Target profit) * sales price per
unit Contribution per unit.
57. Net Present Value = - Co + C1 / (1 + r)
58. Future expected value of a present cash flow = Cash Flow ( 1 + r ) ^ t
59. Present value of a simple future cash flow = Cash Flow / (1 + r) ^ t
60. The Discount Factor = 1 / (1 + r) ^ t
61. Notation used internationally for PV of an annuity is PV ( A, r, n )
62. Notation used internationally for FV of an annuity is FV ( A, r, n )
63. The effective annual rate = ( 1 + r ) ^ t – 1 or (1 + (r / N) ) – 1 )
N = Number of times compounding in a year
64. PV of end of period Annuity = A { (1- (1 / (1+r) ^ n) / r
65. CR = CA : CL
66. Net Worth = CA - CL
67. DER = TL/TNW or debt/equity or TL/equity
68. Price Elasticity of Supply = (% change in quantity supplied/(% change in price)
69. PV = P / R * [(1+R)^T - 1]/(1+R)^T
70. PV = P / (1+R)^T
71. FV = P * (1 + R)^T
72. FV = P*(1-R)^T
73. FV = P / R * [(1+R)^T - 1]
74. FV = P / R * [(1+R)^T - 1] * (1+R)
75. EMI = P * R * [(1+R)^T/(1+R)^T-1)]
76. FV of annuity = A/r ×{(1+r)^n-1}
77. Bond Price = (1/(1+R)^t)((coupon*((1+R)^t-1)/R)+Face Value)

Ram purchased two bonds bond1  and bond 2 with face value of rs 1000 each and coupon of 8% and maturity of 4 yrs and 6 yrs respectively .if ytm is increased by 1% , the percentage change in prices of bond 1 and bond 2 would be.

a 2.39 & 4.84

b 3.29 & 4.84

c 3.29 & 4.48

d 2.39 & 4.48

Solution please

ABM
Indian banking system is classified as
a.online banking system
b. Fractional banking system
c. Accrual banking system
d. Book keeping accounting system

The economy, in which Government not at all involve in decision making process is a .... economy
a. Market
b. Capitalistic
c. Laissez-faire
d. Command

A system in which an individual requires to achieve an overall product
A. Task
B. Job

Ans is Job

Overall k place me specific word use kiya to TASK

Acha

In a survey of 150 people in a city, it was found that there were 50 smokers. Calculate the following based on the above data.

1. The estimate of population proportion

a. 0.3333
b. 0.5
c. 0.6666
d. 1.0

2. Estimated standard error of population

a. 0.0015
b. 0.2211
c. 0.0385
d. 0.4725

3. Binominal standard deviation of population

a. 1.76
b. 2.26
c. 5.77
d. 7.87

4. 95% confidence interval level of population proportion

a. 0.4326, 0.2340
b. 0.5468, 0.3178
c. 0.4088, 0.2578
d. 0.5568, 0.2778

5. 99% confidence interval level of population proportion

a. 0.4326, 0.2340
b. 0.5468, 0.3178
c. 0.4088, 0.2578
d. 0.5568, 0.2778

Tea and coffee are ...... goods

a. substitutes
b. complementary
c. producers
d. none of the above

'Health counseling' is an example of ......

a. phased retirement
b. preretirement counseling
c. honoring experience
d. modifying selection procedure

Paul.A.Samuelson has defined economics as ......

a. science of wealth
b. science of material well being
c. science of dynamic growth and development
d. none of these

Demand pull inflation is the result of ......

a. Increases in Production
b. Increase in the supply of goods
c. Increase in money supply
d. Increase in the cost of production

When national income of a country is calculated in terms of constant prices, it is called as ......

a. Nominal GNP
b. GNP at current prices
c. GNP at constant prices
d. GDP at constant prices

A job analyst's task is to ......

a. prepare job description
b. integrate development activities
c. develop compensation plans
d. advise management

An availability of new talent management information system is a key driver of ......

a. phased retirement
b. career management
c. talent management
d. modifying selection procedure

An availability of information systems to integrate recruitment with learning is a part of ......

a. phased retirement
b. preretirement counseling
c. talent management
d. modifying selection procedure

Recruitment is one of the HR ...... function

a. Acquisition
b. Development
c. Maintenance
d. Compensation

recollected questions from June 2018 Exams

In a survey of 150 people in a city, it was found that there were 50 smokers. Calculate the following based on the above data.

1. The estimate of population proportion

a. 0.3333
b. 0.5
c. 0.6666
d. 1.0

2. Estimated standard error of population

a. 0.0015
b. 0.2211
c. 0.0385
d. 0.4725

3. Binominal standard deviation of population

a. 1.76
b. 2.26
c. 5.77
d. 7.87

4. 95% confidence interval level of population proportion

a. 0.4326, 0.2340
b. 0.5468, 0.3178
c. 0.4088, 0.2578
d. 0.5568, 0.2778

5. 99% confidence interval level of population proportion

a. 0.4326, 0.2340
b. 0.5468, 0.3178
c. 0.4088, 0.2578
d. 0.5568, 0.2778

Murugan:
Given,
X = 10, 20,30,40,50
Total Inputs (N) = (10,20,30,40,50)
Total Inputs (N) =5
Find Standard Error

a. 7.0017
b. 7.0711
c. 7.7011
d. 7.7701

Ans - b

Solution:

Standard Error Formula
SEx̄ = SD/ √(N)
where
SEx̄ = Standard Error of the Mean
SD = Standard Deviation of the Mean
N = Number of Observations of the Sample

To find Mean:
Mean (xm) = (x1+x2+x3...xn)/N
Mean (xm) = 150/5
Mean (xm) = 30

To find SD:
Use Table or it can be done by using this Standard Deviation Calculator
SD = √(1/(N-1)*((x1-xm)^2+(x2-xm)^2+..+(xn-xm)^2))
= √(1/(5-1)((10-30)^2+(20-30)^2+(30-30)^2+(40-30)^2+(50-30)^2))
= √(1/4((-20)^2+(-10)^2+(0)^2+(10)^2+(20)^2))
= √(1/4((400)+(100)+(0)+(100)+(400)))
= √(250)
= 15.811

To Find Standard Error:
Standard Error=SD/√(N)
Standard Error=15.811388300841896/√(5)
Standard Error=15.8114/2.2361
Standard Error=7.0711

The frequency distribution given below refers to the heights in centimetres of 100 people. Determine the mean value of the distribution, correct to the nearest millimetre.

150–156 = 5
157–163 = 18
164–170 = 20
171–177 = 27
178–184 = 22
185–191 = 8

a. 168.7 cm
b. 170.7 cm
c. 171.7 cm
d. 173.7 cm

Ans - c

Solution :
Mean value = {(5 x 153) + (18 x 160) + (20 x 167) + (27 x 174) + (22 x 181) + (8 x 188)} / 100
= 17169 / 100
= 171.7 cm

Mr.Y purchased 8%, 3 years bond of Rs. 10 lac, with annual interest payment and face value payable on maturity. The YTM is assumed@ 6%. Calculate the duration and modified duration.

a. 2.36
b. 2.79
c. 2.63
d. 2.97

Ans - c

Explanation :

Bond’s Duration = ΣPV×T ÷ ΣP

ΣP = 1053421

Now, a = 0.943396 and a^t = 0.839619

So, ΣPV×T = 80000 × 16.666 × (0.160381÷0.056604 – 2.518857) + 2518857
= 419370.767 + 25188579
= 2938227.77

So, Duration of the Bond
= 2938227.77 / 1053421
= 2.79 years

& Modified Duration
= Mckauley Duration ÷ (1 + R)
= 2.79 ÷ 1.06
= 2.63

A company has total assets at 1,50,000 and its total liabilities are 50,000. Based on the accounting equation, we can assume the total equity is 1,00,000. Find the Equity Ratio.

a. 0.33
b. 0.5
c. 0.67
d. 0.75

Ans - c

Solution :

ER = Total Equity / TA
= 100000 / 150000
= 0.67

At Rs. 30 demand for sugar is 500 Kg. When the price falls to Rs. 24, the demand increases to 600 Kg. The price elasticity of demand of sugar is ......

a. 2
b. 2.5
c. 1
d. 1.5

Ans - c

Solution :

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

% Change in Quantity Demanded = 100/500*100 = 20
% Change in Price = 6/30*100 = 20

Price Elasticity of Demand = 20/20 = 1

Find Coefficient of Variance of {13,35,56,35,77}

a. 0.5614
b. 0.6514
c. 1.5614
d. 1.6514

Ans - a

Solution:
Number of terms (N) = 5
Mean:
Xbar = (13+35+56+35+77)/5
= 216/5 = 43.2

Standard Deviation (SD):

σ= √(1/(N - 1)*((x1-xm)^2+(x2-xm)^2+..+(xn-xm)^2))
= √(1/(5-1)((13-43.2)^2+(35-43.2)^2+(56-43.2)^2+(35-43.2)^2+(77-43.2)^2))
= √(1/4((-30.2)^2+(-8.2)^2+(12.9)^2+(-8.2)^2+(33.8)^2))
= √(1/4((912.04)+(67.24)+(163.84)+(67.24)+(1142.44)))
= √(588.2)
σ= 24.2528

Coefficient of variation (CV) = Standard Deviation / Mean
= 24.2528/43.2
= 0.5614

Calculate the relative variability (coefficient of variance) for the samples 60.25, 62.38, 65.32, 61.41, and 63.23 of a population

a. 0.0301
b. 0.0307
c. 0.0103
d. 0.0107

Ans - b

Solution

Mean = (60.25 + 62.38 + 65.32 + 61.41 + 63.23)/5
= 312.59/5
= 62.51

calculate standard deviation
= √( (1/(5 - 1)) * (60.25 - 62.51799)2 + (62.38 - 62.51799)2 + (65.32 - 62.51799)2 + (61.41 - 62.51799)2 + (63.23 - 62.51799)2)
= √( (1/4) * (-2.267992 + -0.137989992 + 2.802012 + -1.107992 + 0.712012))
= √( (1/4) * (5.14377 + 0.01904 + 7.85126 + 1.22764 + 0.50695))
= √ 3.68716
σ = 1.92

calculate coefficient of variance
Coefficient of Variance = (Standard Deviation (σ) / Mean (μ))
= 1.92 / 62.51
= 0.0307

Calculate the mean, SD and variance for random samples of a population 7, 9, 8, 6, 7, 12 and 10

a. 4.2568
b. 4.2658
c. 4.2856
d. 4.2865

Ans - c

Solution:

Mean = (7 + 9 + 8 + 6 + 7 + 12 + 10)/7
= 59/7
= 8.42857

σ = √( (1/7-1) * (7-8.42857)2 + (9-8.42857)2 + (8-8.42857)2 + (6-8.42857)2 + (7-8.42857)2 + (12-8.42857)2 + (10-8.42857)2)
= √( (1/6) * (-1.428572 + 0.571432 + -0.428572 + -2.428572 + -1.428572 + 3.571432 + 1.571432))
= √( (1/6) * (2.0408122449 + 0.3265322449 + 0.1836722449 + 5.8979522449 + 2.0408122449 + 12.7551122449 + 2.4693922449))
= √4.2856866361
σ = 2.07019

variance = σ2
= 2.07019 x 2.07019
= 4.2856

21 bricks have a mean mass of 24.2 kg, and 29 similar bricks have a mass of 23.6 kg. Determine the mean mass of the 50 bricks.

a. 18.35 kg
b. 20.35 kg
c. 23.85 kg
d. 32.85 kg

Ans - c

Solution :
Mean value = ((21 x 24.2) + 29 x 23.6 )) / (21+29)
= 1192.6 / 50
= 23.85 kg

For population with a known standard deviation of 96, a sample of 36 individual leads to an estimate of mean of 150. Find the standard error of mean

a. 12
b. 13
c. 16
d. 18

Ans - c

Solution

Standard Error = α / sqrt( n )
=96/ sqrt36
=96/6
=16

Given,
X = 10, 20,30,40,50
Total Inputs (N) = (10,20,30,40,50)
Total Inputs (N) =5
Find Standard Error

a. 7.0017
b. 7.0711
c. 7.7011
d. 7.7701

Ans - b

Solution:

Standard Error Formula
SEx̄ = SD/ √(N)
where
SEx̄ = Standard Error of the Mean
SD = Standard Deviation of the Mean
N = Number of Observations of the Sample

To find Mean:
Mean (xm) = (x1+x2+x3...xn)/N
Mean (xm) = 150/5
Mean (xm) = 30

To find SD:
Use Table or it can be done by using this Standard Deviation Calculator
SD = √(1/(N-1)*((x1-xm)^2+(x2-xm)^2+..+(xn-xm)^2))
= √(1/(5-1)((10-30)^2+(20-30)^2+(30-30)^2+(40-30)^2+(50-30)^2))
= √(1/4((-20)^2+(-10)^2+(0)^2+(10)^2+(20)^2))
= √(1/4((400)+(100)+(0)+(100)+(400)))
= √(250)
= 15.811

To Find Standard Error:
Standard Error=SD/√(N)
Standard Error=15.811388300841896/√(5)
Standard Error=15.8114/2.2361
Standard Error=7.0711

A zero-Coupon bond has a future value of Rs. 1000 and matures in 2 years and can be currently purchased for Rs. 925. Calculate its current yield.

Explanation :

Here
1000 = 925 × (1 + r)^2

So,
r = 1.0398 – 1
= 0.0398
= 3.98%

A bond with a par-value of Rs. 100 is purchased for 95.92 and it paid a Coupon rate of 5%. Calculate its current yield.

Explanation :

Coupon = Face value × Coupon Rate
And annual interest paid = Market Price × Current Yield
5 = 95.92 × CY
CY = 0.0521 = 5.21%

Find the price of a zero-Coupon bond maturing in 5 years and has a par value of 1000 and a required yield of 6%.

Explanation :

Using bond’s price formula, here Coupon = 0 and hence,
Zero-Coupon Bond’s price = Face Value ÷ (1 + R)T = 1000 ÷ 1.065
But, unless otherwise mentioned, the required yield of most zero-Coupon bonds is based on a semi-annual Coupon payment.

So, Price
= 1000 ÷ 1.0310
= 744

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?

Explanation :

(1+7.5%)^3 = (1+6%)^2 × (1+r)^1
R = 10.56%

A bond is issued with a face value of 1000 that pays a Rs. 25 Coupon semi-annually. Find its Coupon rate.

Explanation :

Coupon = Face Value × Coupon Rate
25 = 1000 × CR ÷ 2
So, CR = 5%

The yield on a 6-year bond is 12% while that of 4-year bond is 9%. What should be the yield on a 2-year bond beginning from now?

Explanation :

(1+12%)^6 = (1+9%)^4 × (1+r)^2
R = 18%

A 3 year bond with par value Rs. 1000 has Coupon rate 12%. If the required rate of return is 10% and interest is payable semi - annually, find the value of the bond.

Explanation :

Here, interest is calculated semi-annually,
so Coupon = 1000 × 12% ÷ 2 = 60,
YTM = 10%/2 = 0.05,
T = 3 × 2 = 6 years
So, price = 1050

A 15 year bond is trading at Rs. 958 with face value of Rs. 1000. The Coupon rate is 8%. What is the yield to maturity?

Explanation :

Since trading value < face value, YTM is > CR
At 7%, price = 1091.08 > 958
And at YTM = 9%, price = 919.39 < 958,

so YTM lies somewhere between 7 and 9.
= 7 + (9-7) × (1091.08 – 958) / (1091.08 – 919.39)
= 7 + 2 × 133.08 / 171.69
= 8.5%

A 6 year bond is selling at Rs. 9500 with face value of Rs. 10000. The annual Coupon amount is 800. What is the yield to maturity?

Explanation :

Since Coupon rate = 8% and market price < Face Value, so YTM must be > CR
Let CR be 9%. So, bond’s price = 9551.41 > 9500
Let CR be 10%, so price = 9128.95 < 9500
So, YTM must lie between 9 & 10.

Using interpolation technique,

YTM = 9% + (10-9) % × (9551.41 – 9500) ÷ (9551.41 – 9128.95)
= 9+51.41/422.46
= 9.12%

Current yield on an 8% Rs. 100 bond is 7.5%. The price of the bond is ......

Explanation :

Bond Price = (1/(1+R)^t)((coupon*((1+R)^t-1)/R)+Face Value)

(Here, t = 1

So, price

= (Coupon + Face Value) ÷ (1 + R)
= (8 + 100) ÷ 1.075 = 100.465)

But, since Coupon Interest = Current Yield × Current Market Price
So, Price = 8 ÷ 7.5% = 8000 ÷ 75 = 106.67

Priyanka made an investment of Rs. 18000 and he expects a return of Rs. 3000 p.a. For 12 years. What is the present value and net present value of the cash flow @ 10% discount rate?

Explanation :

PV = 20441
NPV = PV – 18000
= Rs. 2441

A 12%, 4-year bond of Rs. 100 was purchased by x for Rs. 100. If the market interest rate increased by 1%, what will the market price?

Explanation :

P = 100
CR = 12%
YTM = 12 + 1 = 13%
So, Price = 97.03

Salim purchased 8%, 3 years bond of Rs. 10 lac, with annual interest payment and face value payable on maturity. The YTM is assumed@ 6%. Calculate % change in the price of the bond when the decrease in YTM is 100 basis points from 6% to 5% and the duration is 2.79 years and modified duration is 2.63 years.

Explanation :

Percentage change in price of bond

= -MD × Change in Price
= -2.63 × (6% - 5%)
= 2.63%,

That means a fall in YTM by 1% increases the price of the bond by 2.63%.

Albert purchased 8%, 3 years bond of Rs. 10 lac, with annual interest payment and face value payable on maturity. The YTM is assumed@ 6%. Calculate the duration and modified duration.

Explanation :

Bond’s Duration = SPV×T ÷ SP

SP = 1053421

Now, a = 0.943396 and a^t = 0.839619

So, SPV×T = 80000 × 16.666 × (0.160381÷0.056604 – 2.518857) + 2518857
= 419370.767 + 25188579
= 2938227.77

So, Duration of the Bond
= 2938227.77 / 1053421
= 2.79 years

& Modified Duration
= Mckauley Duration ÷ (1 + R)
= 2.79 ÷ 1.06
= 2.63

Gaurav invested in 12.5%, 5-year bond of face value of Rs. 100. The expected market rate is 15%. What is the duration of the bond?

Explanation :

Bond’s Duration = SPV×T ÷ SP

Bond Price = (1/(1+R)^t)((coupon*((1+R)^t-1)/R)+Face Value)

SP = {12.5 × (1.155 -1) ÷ 0.15 + 100} ÷ 1.155
= 91.6196

Here a = 0.86956 and a^t = 0.497176

So, SPV × T = 12.5 × 6.66636 × {0.502824 ÷ 0.13044 – 2.4588} + 248.588
= 116.33046 + 248.588 = 364.92

So, Duration of the Bond
= 364.92 / 91.6196
= 3.98 years

Q2)Interest on loan capital is:
a)  A deductible expenditure for the purpose of ascertaining taxable income
b)  A non-deductible expenditure for the purpose of ascertaining taxable income
c)  A capital expenditure and as such no tax shield is available
d)  None of these

Q7)The quick ratio is a better measure of liquidity than the current ratio if the firm has current assets composed primarily of:
a)  cash.
b)  work in process inventory
c)  marketable securities.
d)  accruals.

Q9)What is repayment of entire loan principal at the end of the loan period called ?
a)  balloon payment
b)  compounded payment
c)  annuity
d)  term payment

A firm has a capital of Rs. 400, Term Loan 400, Sundry Creditors 130, Stock 224 cash 62, Debtors 46 and Fixed Assets 868
Answer following question

1.Current ratio is ......

a. 1.25:1
b. 1.85:1
c. 2.1:1
d. 2.55:1

Ans - d

Solution

Current Ratio= Current Assets/Current Liabilities
= 332/130
= 2.55:1
.............................................

2.The quick ratio would be ......

a. 1:1
b. 0.83:1
c. 0.65:1
d. 0.44:1

Ans - b

Solution

Quuick Ratio = Current assets- Stock /Current Liabilities
= 332-224/130
= 108/130
= 0.83:1
.............................................

3.Net worth and tangible net worth is ......

a. 270, 400
b. 270, 624
c. 670, 670
d. 624, 670

Ans - c

Solution

Net worth=total assets-Total liabilities
= 1200-530=670
Tangible networth = share capital + reserve
= 400+270=670
.............................................

4. Its Debt Equity Ratio

a. 0.6:1
b. 0.9:1
c. 1.1:1
d. 2:1

Ans - a

Solution

Debt equity ratio=total long term debt/shareholder fund (tangible networth)
=400/670
=0.6:1
.............................................

5.If Sales are 920 the Debt turnver ratio would be ......

a. 10 times
b. 20 times
c. 0.5 month
d. 1 month

Ans - b

solution:

Debt Turnover Ratio = Net Credit Sales / Average Debtors
= 920/46
= 20 times
.............................................

6.if profit are 67, Return on equity would be ......

a. 16.75%
b. 15.50%
c. 10.00%
d. 20.00%

Ans - c

Solution

Return on Equity= Net Income/Share holders equity*100
= 67/670*100
= 10%
.............................................

The debt equity ratio of X Ltd. is 0.5 : 1. Which of the following would increase/decrease or not change the debt equity ratio?

1. Further issue of equity shares

a. Increase
b. Decrease
c. No change
d. None of the above

Ans - b

2. Cash received from debtors

a. Increase
b. Decrease
c. No change
d. None of the above

Ans - c

3. Sale of goods on cash basis

a. Increase
b. Decrease
c. No change
d. None of the above

Ans - c

4. Redemption of debentures

a. Increase
b. Decrease
c. No change
d. None of the above

Ans - b

5. Purchase of goods on credit

a. Increase
b. Decrease
c. No change
d. None of the above

Ans - c

Solution:

The change in the ratio depends upon the original ratio. Let us assume that external funds are Rs. 5,00,000 and internal funds are Rs. 10,00,000.

Now we will analyse the effect of given transactions on debt equity ratio.

1. b
Assume that Rs. 1,00,000 worth of equity shares are issued.
This will increase the internal funds to Rs. 11,00,000.
The new ratio will be 0.45 : 1 (5,00,000/11,00,000).
Thus, it is clear that further issue of equity shares decreases the debt-equity ratio.

2. c
Cash received from debtors will leave the internal and external funds unchanged as this will only affect the composition of current assets.
Hence, the debt-equity ratio will remain unchanged.

3. c
This will also leave the ratio unchanged as sale of goods on cash basis neither affect Debt nor equity.

4. b
Assume that Rs. 1,00,000 debentures are redeemed.
This will decrease the long-term debt to Rs. 4,00,000.
The new ratio will be 0.4 : 1 (4,00,000/10,00,000).
Redemption of debentures will decrease the debit-equity ratio.

5. c
This will also leave the ratio unchanged as purchase of goods on credit neither affect Debt nor equity.

From the following balance sheet of ABC Co. Ltd. as on March 31, 2017. Calculate ......

I. Equity and Liabilities - 25,00,000

1. Shareholders’ funds
a) Share capital 12,00,000
b) Reserves and surplus 2,00,000
c) Money received against share warrants 1,00,000

2. Non-current Liabilities
a) Long-term borrowings 4,00,000
b) Other long-term liabilities 40,000
c) Long-term provisions 60,000

3. Current Liabilities
a) Short-term borrowings 2,00,000
b) Trade payables 1,00,000
c) Other current liabilities 50,000
d) Short-term provisions 1,50,000

II. Assets - 25,00,000

1. Non-Current Assets
a) Fixed assets 15,00,000
b) Non-current investments 2,00,000
c) Long-term loans and advances 1,00,000

2. Current Assets
a) Current investments 1,50,000
b) Inventories 1,50,000
c) Trade receivables 1,00,000
d) Cash and cash equivalents 2,50,000
e) Short-term loans and advances 50,000

1. Current assets

a. Rs. 2,00,000
b. Rs. 5,00,000
c. Rs. 7,00,000
d. Rs. 15,00,000

Ans - c

2. Current liabilities

a. Rs. 2,00,000
b. Rs. 5,00,000
c. Rs. 7,00,000
d. Rs. 15,00,000

Ans - b

3. Working Capital

a. Rs. 2,00,000
b. Rs. 5,00,000
c. Rs. 7,00,000
d. Rs. 15,00,000

Ans - a

4. Debt

a. Rs. 2,00,000
b. Rs. 5,00,000
c. Rs. 7,00,000
d. Rs. 15,00,000

Ans - b

5. Equity

a. Rs. 2,00,000
b. Rs. 5,00,000
c. Rs. 7,00,000
d. Rs. 15,00,000

Ans - d

6. Debt equity ratio

a. 1 : 0.33
b. 1 : 0.5
c. 0.33 : 1
d. 0.5 : 1

Ans - c

Solution:

1. c
Current assets = Current investments + Inventories + Trade receivables + Cash and cash equivalents + Short-term loans and advances
= 1,50,000 + 1,50,000 + 1,00,000 + 2,50,000 + 50,000
= 7,00,000

2. b
Current Liabilities = Short-term borrowings + Trade payables + Other current liabilities + Short-term provisions
= 2,00,000 + 1,00,000 + 50,000 + 1,50,000
= 5,00,000

3. a
Working Capital = Current assets – Current liabilities
= Rs. 7,00,000 – Rs. 5,00,000
= Rs. 2,00,000

4. b
Debt = Long-term borrowings + Other long-term liabilities + Long-term provisions
= Rs. 4,00,000 + Rs. 40,000 + Rs. 60,000
= Rs. 5,00,000

5. d
Equity = Share capital + Reserves and surplus + Money received against share warrants
= Rs. 12,00,000 + Rs. 2,00,000 + Rs. 1,00,000
= Rs. 15,00,000

Alternatively,
Equity = Non-current assets + Working capital – Non-current liabilities
= Rs. 18,00,000 + Rs. 2,00,000 – Rs. 5,00,000
= Rs. 15,00,000

6.
Debt-Equity Ratio = Debts / Equity
= 50,0000 / 1,50,0000
= 0.33 : 1

Murugan:
Gaurav invested in 12.5%, 5-year bond of face value of Rs. 100. The expected market rate is 15%. What is the duration of the bond?

Explanation :

Bond’s Duration = SPV×T ÷ SP

Bond Price = (1/(1+R)^t)((coupon*((1+R)^t-1)/R)+Face Value)

SP = {12.5 × (1.155 -1) ÷ 0.15 + 100} ÷ 1.155
= 91.6196

Here a = 0.86956 and a^t = 0.497176

What is a here

Read the following data & answer the below questions

A shopkeeper sells gel pen at 10 per pen. At this price he can sell 120 per month. After some time, he raises the price to 15 per pen. 60 pens are sold every month. The number of refills bought decreases from 200 to 150. The number of ink pen bought goes up from 90 to 180 per month.

1. The price elasticity of demand when gel pen’s price increases form 10 per pen to 15 per pen is equal to ......

a. 2.5
b. 1.0
c. 1.65
d. 2.66

Ans - c
.............................................

2. The cross elasticity of monthly demand for refills when price of gel pen increases from 10 to 15 is equal to ......

a. -0.71
b. 0.25
c. -0.19
d. 0.38

Ans - a
.............................................

3. The cross elasticity of monthly demand for ink pen when the price of gel pen increases from 10 to 15 is equal to ......

a. 1.65
b. -1.05
c. -2.09
d. 2.09

Ans - a
.............................................

4. Suppose income of the residents of locality increases by 50% & the quantity of gel pens demanded increases by 20%. Income elasticity of demand for gel pen ......

a. 0.4
b. 0.6
c. 1.25
d. 1.50

Ans - a
.............................................

Given,

Recoveries of loan and advance  - Rs. 3000 Crores
Misc  capital receipt    - Rs. 500 Crores
Market loans      - Rs. 600 Crores
Short term borrowings    - Rs. 1200 Crores
External assistance (Net)  - Rs. 500 Crores
State provident fund    - Rs. 600 Crores
Other  receipts (Net)    - Rs. 1200 Crores
Securities issued against small savings - Rs. 600 Crores
Recoveries of short term loans and advances from states and loans to govt servants - Rs. 1000 Crores   
Total Non Tax Revenue    - Rs. 5000 Crores
Net Tax Revenue      - Rs. 2000 Crores
Draw down cash balance    - Rs. 4000 Crores

1. Calculate Debt Receipt ...

a. Rs 2500 Crores
b. Rs 3700 Crores
c. Rs 4700 Crores
d. Rs 5400 Crores

Ans - c
.............................................

2. Calculate Non Debt Receipt ...

a. Rs 2500 Crores
b. Rs 3700 Crores
c. Rs 4700 Crores
d. Rs 5400 Crores

Ans - a
.............................................

3. Calculate Capital Receipt ...

a. Rs 4700 Crores
b. Rs 5400 Crores
c. Rs 6200 Crores
d. Rs 7200 Crores

Ans - c
.............................................

Solution :

1. Debt Receipt = Market Loans + Short Term Borrowings + External assistance(NET) + Securities issued against Small savings + State provident fund + other Receipts(Net)
= 600 + 1200 + 500 + 600 + 600 + 1200
= 3700 Crores

2. Non Debt Receipt = Recoveries of loan & advances (deduct recoveries of short term loans & advance from state and loans to govt sarvants) + MISC Capital receipts
= (3000-1000)+500
= 2500 Crores

3. Capital Receipt = Non Debt Receipt + Debt Receipt
= 3700 + 2500
= 6200 Crores

A firm has a capital of Rs. 400, Term Loan 400, Sundry Creditors 130, Stock 224 cash 62, Debtors 46 and Fixed Assets 868
Answer following question

1.Current ratio is ......

a. 1.25:1
b. 1.85:1
c. 2.1:1
d. 2.55:1

Ans - d

Solution

Current Ratio= Current Assets/Current Liabilities
= 332/130
= 2.55:1
.............................................

2.The quick ratio would be ......

a. 1:1
b. 0.83:1
c. 0.65:1
d. 0.44:1

Ans - b

Solution

Quuick Ratio = Current assets- Stock /Current Liabilities
= 332-224/130
= 108/130
= 0.83:1
.............................................

3.Net worth and tangible net worth is ......

a. 270, 400
b. 270, 624
c. 670, 670
d. 624, 670

Ans - c

Solution

Net worth=total assets-Total liabilities
= 1200-530=670
Tangible networth = share capital + reserve
= 400+270=670
.............................................

4. Its Debt Equity Ratio

a. 0.6:1
b. 0.9:1
c. 1.1:1
d. 2:1

Ans - a

Solution

Debt equity ratio=total long term debt/shareholder fund (tangible networth)
=400/670
=0.6:1
.............................................

5.If Sales are 920 the Debt turnver ratio would be ......

a. 10 times
b. 20 times
c. 0.5 month
d. 1 month

Ans - b

solution:

Debt Turnover Ratio = Net Credit Sales / Average Debtors
= 920/46
= 20 times
.............................................

6.if profit are 67, Return on equity would be ......

a. 16.75%
b. 15.50%
c. 10.00%
d. 20.00%

Ans - c

Solution

Return on Equity= Net Income/Share holders equity*100
= 67/670*100
= 10%
.............................................

The debt equity ratio of X Ltd. is 0.5 : 1. Which of the following would increase/decrease or not change the debt equity ratio?

1. Further issue of equity shares

a. Increase
b. Decrease
c. No change
d. None of the above

Ans - b

2. Cash received from debtors

a. Increase
b. Decrease
c. No change
d. None of the above

Ans - c

3. Sale of goods on cash basis

a. Increase
b. Decrease
c. No change
d. None of the above

Ans - c

4. Redemption of debentures

a. Increase
b. Decrease
c. No change
d. None of the above

Ans - b

5. Purchase of goods on credit

a. Increase
b. Decrease
c. No change
d. None of the above

Ans - c

Solution:

The change in the ratio depends upon the original ratio. Let us assume that external funds are Rs. 5,00,000 and internal funds are Rs. 10,00,000.

Now we will analyse the effect of given transactions on debt equity ratio.

1. b
Assume that Rs. 1,00,000 worth of equity shares are issued.
This will increase the internal funds to Rs. 11,00,000.
The new ratio will be 0.45 : 1 (5,00,000/11,00,000).
Thus, it is clear that further issue of equity shares decreases the debt-equity ratio.

2. c
Cash received from debtors will leave the internal and external funds unchanged as this will only affect the composition of current assets.
Hence, the debt-equity ratio will remain unchanged.

3. c
This will also leave the ratio unchanged as sale of goods on cash basis neither affect Debt nor equity.

4. b
Assume that Rs. 1,00,000 debentures are redeemed.
This will decrease the long-term debt to Rs. 4,00,000.
The new ratio will be 0.4 : 1 (4,00,000/10,00,000).
Redemption of debentures will decrease the debit-equity ratio.

5. c
This will also leave the ratio unchanged as purchase of goods on credit neither affect Debt nor equity.

From the following balance sheet of ABC Co. Ltd. as on March 31, 2017. Calculate ......

I. Equity and Liabilities - 25,00,000

1. Shareholders’ funds
a) Share capital 12,00,000
b) Reserves and surplus 2,00,000
c) Money received against share warrants 1,00,000

2. Non-current Liabilities
a) Long-term borrowings 4,00,000
b) Other long-term liabilities 40,000
c) Long-term provisions 60,000

3. Current Liabilities
a) Short-term borrowings 2,00,000
b) Trade payables 1,00,000
c) Other current liabilities 50,000
d) Short-term provisions 1,50,000

II. Assets - 25,00,000

1. Non-Current Assets
a) Fixed assets 15,00,000
b) Non-current investments 2,00,000
c) Long-term loans and advances 1,00,000

2. Current Assets
a) Current investments 1,50,000
b) Inventories 1,50,000
c) Trade receivables 1,00,000
d) Cash and cash equivalents 2,50,000
e) Short-term loans and advances 50,000

1. Current assets

a. Rs. 2,00,000
b. Rs. 5,00,000
c. Rs. 7,00,000
d. Rs. 15,00,000

Ans - c

2. Current liabilities

a. Rs. 2,00,000
b. Rs. 5,00,000
c. Rs. 7,00,000
d. Rs. 15,00,000

Ans - b

3. Working Capital

a. Rs. 2,00,000
b. Rs. 5,00,000
c. Rs. 7,00,000
d. Rs. 15,00,000

Ans - a

4. Debt

a. Rs. 2,00,000
b. Rs. 5,00,000
c. Rs. 7,00,000
d. Rs. 15,00,000

Ans - b

5. Equity

a. Rs. 2,00,000
b. Rs. 5,00,000
c. Rs. 7,00,000
d. Rs. 15,00,000

Ans - d

6. Debt equity ratio

a. 1 : 0.33
b. 1 : 0.5
c. 0.33 : 1
d. 0.5 : 1

Ans - c

Solution:

1. c
Current assets = Current investments + Inventories + Trade receivables + Cash and cash equivalents + Short-term loans and advances
= 1,50,000 + 1,50,000 + 1,00,000 + 2,50,000 + 50,000
= 7,00,000

2. b
Current Liabilities = Short-term borrowings + Trade payables + Other current liabilities + Short-term provisions
= 2,00,000 + 1,00,000 + 50,000 + 1,50,000
= 5,00,000

3. a
Working Capital = Current assets – Current liabilities
= Rs. 7,00,000 – Rs. 5,00,000
= Rs. 2,00,000

4. b
Debt = Long-term borrowings + Other long-term liabilities + Long-term provisions
= Rs. 4,00,000 + Rs. 40,000 + Rs. 60,000
= Rs. 5,00,000

5. d
Equity = Share capital + Reserves and surplus + Money received against share warrants
= Rs. 12,00,000 + Rs. 2,00,000 + Rs. 1,00,000
= Rs. 15,00,000

Alternatively,
Equity = Non-current assets + Working capital – Non-current liabilities
= Rs. 18,00,000 + Rs. 2,00,000 – Rs. 5,00,000
= Rs. 15,00,000

6.
Debt-Equity Ratio = Debts / Equity
= 50,0000 / 1,50,0000
= 0.33 : 1

Murugan:
Gaurav invested in 12.5%, 5-year bond of face value of Rs. 100. The expected market rate is 15%. What is the duration of the bond?

Explanation :

Bond’s Duration = SPV×T ÷ SP

Bond Price = (1/(1+R)^t)((coupon*((1+R)^t-1)/R)+Face Value)

SP = {12.5 × (1.155 -1) ÷ 0.15 + 100} ÷ 1.155
= 91.6196

Here a = 0.86956 and a^t = 0.497176

What is a here

Caiib ABM Module C HRM Case study

Case Study : The top management of ABc. Bank was in a triumphant mood after engaging XYZ Ltd, one of the top IT Companies as a consultant for a massive technology upgradation in the Bank. Their enthusiasm was short lived, as the project did not progress well and the consultants were not able to deliver the desired results even after several months. In fact the Consultants were of the view that it may never be possible to implement the project with 100% success as they seemed to be facing resistance from the employees at multi-levels. The employees at all levels seemed reluctant to cooperate. Their fear of Role erosion seemed palpable.

1. What does “Role erosion” mean in this context?

a. The fear of the employee that he will be sent out
b. Fear that the responsibility and the power will reduce
c. Fear that he will no more be an indispensable
d. a & b

Ans - d
.............................................

2. The critical issue in this case is:

a. Attitudes of individuals
b. Training of people
c. Group behavior due to a sense of the unknown
d. All the above

Ans - c
.............................................

3. How could this situation have been managed better?

a. By issuing project details and time frame mentioning punishments in case of delay
b. By roping in the HR professionals to act as coordinator
c. By recognizing that any change brings its own reactions and co-opting the managers even before Consultants moved in
d. b & c

Ans - d
.............................................

4. The Bank should deal with the employee resistance by:

a. Co-opting the employees
b. Communicating strategically about the potential benefits
c. Conducting simultaneous training to familiarize the staff with the new software
d. All of the above

Ans - d
.............................................

Caiib ABM Unit :9 GDP Concepts

1. Direct Tax- Rs. 9600
Indirect Tax-Rs.45600
Foreign inward paid abroad -Rs.48000
Foreign inward Received abroad  -Rs.36000
Depreciation - Rs.48000
Surplus - Rs. 4200

Calculate GDP

2.  mention GDP expenditure Formulae
Ans- C+I+G+(X-M)
c consumption
I  gross investment
G govt spending
x export
I import

3.GDP+Net factor income from abroad= ??
GNP

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Caiib BFM : Unit 10 Risk Regulation In Banking Industry

correct me for any mistake

   Meenakshi:
1.Risk aggregation in ICAAP implies..
a. Sum total of risks measured across various risks
b. Sum total of risks measured in terms of pillar 1 guidelines
c. Sum total of risks measured after accounting for risk diversification
d. assessment of bank's internal capital, capital adequacy assessment and strategy

2. Under SRP..
1. supervisors should review and evaluate bank's ICAAP
2. Banks must have capital for projected growth
3. Supervisors may advise banks to hold capital in excess of regulatory capital

a. 1 and 2 are true
b. 2 and 3 are true
c. 3 and 1 are true
d. all are true

3. ICAAP document of the bank may not contain..
a. Anticipated capital expenditure
b. monitoring system for complaince with internal policies
c. Strategic plan of the bank
d. All these may be included in ICAAP document

4. Principle of proportionality in ICAAP implies..
a. increasing capital as business increases
b. Apportioning of capital across various risk categories proportionally
c. Additional capital for risks not covered under pillar 1 guidelines in proportion to capital requirement assessed
d. Higher degree of sophistication in risk assessment methodolies as complexity of banking operation increases

5. ICAAP and SREP are two important components...
a. Minimum Capital requirements
b. Supervisory Review Process
c. Market Discipline
d. All the above

6. The ultimate responsibility for designing and implementation of ICAAP lies with..
a. Bank's board of directors
b. RBI
c. FEDAI
d. BCBG

7. Which of the following is not one of the three principles of Basel 2?
a. Minimum Capital requirements
b. Supervisory Review Process
c. Market Discipline
d. capital for market risks

8. Pillar -II supervisory review consists of...
a. evaluate risk Assessment
b. Ensure Soundness and Integrity of Bank's Internal process to assess the Capital Adequacy
c. Ensure maintenance of maximum capital with PCA for shortfall
d. Prescribe differential capital, where necessary i.e. where the internal process are slack

9. Under Supervisory Review process, a bank would be called "outlier" if the bank is under... basis point interest rate shock and faces reduction in capital by... % or more
a. 100,10
b. 100,20
c. 200,10
d. 200, 20

10. Three pillars of Basel 2 are
a. Independent of each other
B. Complimentary
c. both a and b

11. The Basel II revised framework consists of three mutually reinforcing pillars. out of the following which is not the reinforcing pillar?
a. Minimum Capital requirements
b. Supervisory Review Process
c. Market Discipline
d. None

12. The main purpose of the supervisory Review as per Basel II is:
a) To ensure that banks are profitable
b) To ensure that credit risk is adequately managed by banks
c) To ensure that banks have adequate capital to support all risks
d) To encourage banks to develop and use better management techniques
e) Both (c) & (d)

13. As per principle of supervisory review banks should have process for
a) assessing capital adequacy in relation to risk profile
b) strategy for maintaining capital levels
c) strategy for achieving profit targets
d) Both (a) & (b)
e) Both (b) & (c)

14. As per principle 2 of supervisory review, emphasis should be on quality of the risk
management and control which would involve:
a) On site inspection and off site review
b) Review of work done by Auditor
c) Discussions with Bank Management
d) Both (a) & (c) only
e) All of these

15. As per principle 3 of the Supervisory Review, banks should operate at
a. Minimum regulatory capital ratio
b. Above regulatory capital ratio

16. Under Supervisory Review, the supervisors are expected to concentrate on:
a) Risks not considered under Pillar I such as credit concentration Risk
b) Risks considered under Pillar but fully captured such as strategic risk or interest rate risk in the banking book
c) Factors external to the bank e.g. business cycle effects
d) All of these e) None of these

17. As per 2nd Pillar of Basel II when supervisors are expected to invervene?
a) regularly b) continuous basis c) yearly d) whenever necessary

18. As per Basel II, which of the following issues require focused attention of supervisors
a) Interest rate risk in the Banking Book
b) Operational Risk
c) Credit concentration risk
d) All of these
e) None of these

19. Supervisory review would not include:
a) Evaluating risk assessment of banks by RBI
b) Ensuring soundness and integrity of bank's internal processes to assess the adequacy of capital
c) Ensuring maintenance of minimum capital with prompt corrective action for shortfall
d) All of these e) None of these

...........

Haircut :

by Nilesh Kumar:
Maan lo koi loan diya bank ne..100 crore ka..
100 crore kiCollateral/security k against.. 2 saal me repay krna hai...

To kse uske liye risk weight asset count kiya jata hai...
Haircut se simple language me smjh lo ki 2 saal tk wo 100crore security ki value 100 crore hi ni rhegi..time k sath kuch km bhi ho skti hai...but loan aapne de diya 100crore...ab apko risk weight assets dekhna hai.. jispe risk ho loss hone ka...
100 crore ka loan
Loan maturity 2yr
Security 100crore
Table se dekhogi to dikhega 2yr k liye govt security ka haircut 2%
Matlab govt security/collateral will lost it's value by 2% in 2 yr..
To collateral value hui ek trh se 98crore
Abhi tumne loan diya hai 100crore..
Aur tumhare paas security hai 98 crore k equivalent..
To tumhara net exposure kitna hua..
2crore...
Ab RWA nikl jayega wo bhi table me diya hua hai..
Jaise BB rated company ko agr loan diya hota ...to 2crore net exposure.  But RWA for BB rated loan is 150%
So 3 crore RWA
Now capital required for RWA is 9%
Which will be 9% of 3 crore = 27 lac


Ye bss smjhaya hai concept....baaki buk pdhke smjh aa jayega easily..

Meenakshi:
if bank granted loan of 100 cr .. n we have to repay in 2 yrs against collateral /security....for that we count risk weight asset....
haircut.. in 2 yrs the value if 100 cr will remain same ..it wi not change with time..if we have granted loan then than we have to see rwa..in which there are chances of loss

100 cr loan
loan security 2 yr
security 100 cr

if we see table we get for 2 yr loan haircut is 2% means for govt security/collateral will lost its value by 2% in 2 yr ...so collateral value in that way is 98 cr n we have security equivalent to 98 cr..
net exposure is 2 cr
now calculate rwa from table

like loan granted to bb rated company then 2 cr net exposure  but rwa is 150% for this so 3 cr rwa
now capital required is 9%
which will be 9%of 3 cr =27lac

A haircut is the difference between the loan amount and the actual value of the asset used as collateral. It reflects the lender's perception of the risk of fall in the value of assets. But in the context of loan recoveries, it is the difference between the actual dues from a borrower and the amount he settles with the bank.

Compare it with margin..It is nothing but margin

In short fall back of security value n outstanding