BANKING MANAGEMENT

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AEREN FOUNDATION’S                                                                 Maharashtra Govt. Reg. No.: F-11724

 

SUBJECT : BANKING MANAGEMENT

Total Marks—80

Q.1) The exchange rate and forward rate of rupee against US dollar on 3rd November, 2008 is given below:

(20 marks)

Spot rate 1 US dollar Rs 45.36

One month forward 3.72%

Three months forward 3.27%

Six months forward 2.76%

Twelve months forward 2.26%

Calculate the forward rate, forward premium rate and swap rate from the given data.

Answer:

Spot rate 1 US dollar Rs 45.36

USDINR ON FWD              1.0000                   1.5000                   1.1700                   1.1800                   0.1000  

One month forward 3.72%

USDINR 1M FWD              34.2500 36.0000 34.7500 35.7500 -1.7500

Three months forward 3.27%

Q.2) In May beginning you decide that shares in X Ltd. will rise over the next month or so. The current priceis Rs 100 and you hope that the shares will be at Rs. 150 by the end of July. Give your comments if theOption is traded and if the option is not traded. Make assumptions.

(20 marks)

Answer: Many of us would have had the following 2 questions or faced similar scenarios at some point of our trading career:

1. Nifty is trading at 5950 and today is the day of expiry. At around 2:00 PM, Nifty 5900 calls and 6000 puts are trading at around Rs 45. Ideally it should be at least 50, so why?

Q.3) (15 marks)

A) The unit price of TSS scheme of a mutual fund is Rs 10. The public offer price (POP) of the unit is Rs10.204 and the redemption price is Rs 9.80.

Calculate

i) Front-end load and

ii) Back-end load.

(1)Calculation of Front-end Load (%)

We know that Sale Price = NAV (1 + Front-end Load %)

B) Mr. A can earn a return of 16% by investing in equity shares on his own. Now he is considering a recentlyannounced equity based mutual fund scheme in which initial expenses are 5.5 percent and annual recurringexpenses are 1.5 percent. How much should the mutual fund earn to provide Mr. A a return of 16%

(5 Marks)

Answer: There are no initial entry laods in MFs. So the intial expense mentioned by you does not apply. The recurring exp. called expense ratio is charged on the AUM and before the NAV is declared. In other words, the NAv is post such expense deduction. Hence, if you see a fund return of

Q.4) The closing price of the stock of Veryfine Ltd. at the stock exchange for 20 successive days was asfollows:

Day 1 2 3 4 5 6 7 8 9 10

Closing Price (Rs.) 25 26 25 24 26 26 28 26 25 27

Day 11 12 13 14 15 16 1

7 18 19 20

Closing Price (Rs.) 27 25 26 28 26 26 24 25 26 25

You are required to calculate a 7 day moving average of stock price of the company and comment on its short-termtrend.

Answer:VeryFine Co., Ltd. manufactures broadcasting apparatuses. The company was founded in 2007 and is based in Bupyeong-Gu, South Korea.

A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random price fluctuations. A moving average (MA) is a trend-following or lagging

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