BFM- quantitatives ( collection by Hanumantha Rao) 1. Probability of occurrence=4 Potential financial impact=4 Impact of internal control=0% What is the estimated level of operational risk? A.3 B.2 C.0 D.4 =(4*4*(1-0))square.5=4, So ans is d (look for page295 BFM) Estimated level of operational risk=Estd probability of occurrence(4)*Estd potential financial impact(4) *estimated impact of internal controls 2 If there is an asset of Rs 120 in the doubt ful-I cat and the realization value of security is rs 90 only , what will be the provision requirement. A Rs 48 B Rs 57 C Rs 39 D Rs 75 Ans : 48 since it a doubtful-I cat so provisioning will be 20% of realization value Rs 90 i.e Rs 18 and 100% of short Fall that is 120- 90= 30. So ans will be 30+1-8= 48 3(a). If there is an asset of Rs 120 only in the doubt ful-II cat and the realization value of security is Rs 90 if above mentioned asset in doubtful-ii category what will be the provision requirement. A 39 B 57 C 66 D 75
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BFM- quantitatives ( collection by Hanumantha Rao)
1. Probability of occurrence=4
Potential financial impact=4 Impact of internal control=0%
What is the estimated level of operational risk?
A.3 B.2
C.0 D.4
=(4*4*(1-0))square.5=4, So ans is d (look for page295 BFM)
Estimated level of operational risk=Estd probability of occurrence(4)*Estd potential financial impact(4) *estimated impact of
internal controls
2 If there is an asset of Rs 120 in the doubt ful-I cat and the
realization value of security is rs 90 only , what will be the provision
requirement.
A Rs 48
B Rs 57
C Rs 39
D Rs 75
Ans : 48 since it a doubtful-I cat so provisioning will be 20% of
realization value Rs 90 i.e Rs 18 and 100% of short Fall that is 120-
90= 30. So ans will be 30+1-8= 48
3(a). If there is an asset of Rs 120 only in the doubt ful-II cat and
the realization value of security is Rs 90 if above mentioned asset in
doubtful-ii category what will be the provision requirement.
A 39
B 57
C 66
D 75
Ans : b since it a doubtful-II cat so 30% realization value of Rs
90 i.e Rs 27 and 100% of short Fall that is 120-90= 30 so ans will
be 30+27= 57
3(b). If there is an assets of Rs 120 only in the doubt ful-III cat and
the realization value of security is Rs 90 if above mentioned asset in
doubt-III than what will be the provision requirement.
A 120
B 48
C 57
D 108
Ans : a since it a doubtful-III cat so 100% of realization value Rs 90
i.e Rs 90 and 100% of short Fall that is 120-90= 30 so ans will be
90+30=120
4. A preshipment account above 3 years as on mar 31 2004 has debit
balance of Rs 4 lakh. Principle security value is 1.50 lakh and ECGC
cover is available at 50 %. What provision will be made on the a/c as
on 31.05.2025 .
A Rs 2.15 lac
B 2.0 lac
C 1.92 lac
D 2.25 lac
Ans : a do not know pl.. solved any body I m unable to
5. A/C of ABC has become doubtful with balance of Rs. 6 lac . The
collateral security value is Rs 3 lac and that of principle security is 2
lac. Guarantors worth is Rs 10 lac . A/c is in more than 1 Yr and up
to 3 yr doubtful category . What will be amount of provision as on
mar 2013.
A Rs 1.50 lac
B 2.50 lac
C 1.80 lac
D 3.0 lac
Ans : B since it is in more than two yr in doubtful category it
should be treated as doubtful-II cat and allow 30% of realisation
value that is 3+2=5 , 30% of 5 will be Rs 1.50 lac and 100% of
short fall that is 6-5=1 lac so 1.50+1.0=2.50 lac ans
6. Provisions to be made for a standard asset....teaser housing loan
A)0.25%
B)0.40%
C)1%
D) 2%
Ans: 2%
7. A 5-year 6% semi-annual bond @ market yield of 8%, having a price of
Rs. 92, falls to Rs. 91.80 at a yield of 8.10%, what is Basis Point Value
(BPV)?
1) Rs. 0.20 2) Rs. 0.10 3) Rs. 0.02 4) Rs. 0.05
BPV=92-91.80/8.10%-8%=.2/.10*100=.2/10=.02
8. Received order of USD 50000(CIF) to Australia on 1.1.11 when USD/INR Bill Buying Rate is 43.50. How much preshipment finance will be released
considering profit margin of 10% and Insurance and freight cost@ 12%.
ans
FOB Value = CIF – Insurance and Freight – Profit (Calculation at Bill Buying
% change in price =- modified duration × yield change
= - 5.556× (+0.50%)
= (-)2.7778 %
= (-) 2.8
( - )means decrease in price
2.8 % decrease in price. .
49. Currency X having 6% risk free rate for 6 months has a
spot rate of 30Y . where Y is another currency and has 4% risk
free rate for 06 months period. The 6 months forward rate of X in
terms of Y would be
a) 29.70 B
b) 29.71 B
c) 30.30 B
d) 30.29 B
ans : b
According to interest rate parity..
(Fyx/ Syx) = (1+Interest of y)/(1+Interest of x)
F = Forward rate
S = Spot rate
yx means..expression of exchange rate...
Here exchange rate is given in
Terms of..
1 x = 30 y..
Thatswhy x is in the denominator. .yx
Fyx / 30Y = (1+2%)/(1+3%)
Fyx = ( 1.02/1.03) × 30Y
Fyx = 0.99029 × 30Y
Fyx = 29.7087 Y
Fyx = 29.71 Y
50 An individual purchases a call option for 500 shares of A with
strike price at Rs 120 (Present price Rs 100) and remaining maturity of
03 months at a premium of Rs 40 . On maturity shares of A was
priced at Rs 140. Taking interest cost @ 12% p.a . what is the profit
earned by the individual on the transaction ?
a) No loss no profit
b) Rs 600 loss
c) Rs 10600 loss
d) None of these
Ans : c Explanation. .
Call option ..
He will pushase 500 shares of A..at a price of 120
Tatal value of shares is..
60000
Then he will sell the total shares in the market at a price of 140..
500 × 140
= 70000
So profit of 10000 in the transaction. .
But he has to pay the premium for call options. .
Which is 40 × 500
= 20000
And for getting this much fund interest cost is..
= 20000 × 3 % for 3 months (12% p.a for 03 months 12/4=3)
= 600
Total premium + premium cost
= 20000 + 600
= 20600
In totality. ..
= 10000 - 20600
= - 10600
51. A financial institution buys a specified no of futures at NSE on
a stock Rs 90 each when spot price of the stocks Rs 95 . At the
maturity of the contract the FI takes delivery of the shares. During
the period of Rs 3. The acquisition cost to the FI per share is (
ignore any commission charged by exchange)
a) Rs 95
b) Rs 90
c) Rs 97
d) None of these
ans : b
52. A fixed for floating swap on a notional amount of Rs 10 crores
exchanges 9% fixed against 2% over MIBOR. Settlement is up
front based on closing MIBOR of the immediately preceding quarter. If
the MIBOR is 4% on the last day of the quarter, what is amount of
settlement and who pays it ? Given risk free rate is 5%
a) Rs 12,50,000 floating rate payer
b) Rs 12,34,567 fixed rate payer
c) Rs 7,40,740 fixed rate payer
d) Rs 7,50,000 fixed arte payer
ans: Here question is for..
Exchange of interest rate payment. .
Only difference amount of interest will be paid...
By one party to another party. ..
two parties
1... fixed interest rate payer who will pay 9 % fixed interest rate
2 ...floating interest rate payer...
Who will pay 2 + MIBOR interest rate
MIBOR is at the end of last quarter is 4 %
So total floating rate us 6 %..
And difference of interest rate is..
= 9 - 6= 3 %
Means fixed interest rate payer will pay the difference of interest to floating
interest rate party..
Notional value..
10 crore. .
Difference interest rate for the one quarter is..
= 3 / 4= 0.75%
So 0.75 % of 10 crore
= 750000
That is Answer... d
53. A bank borrows US $ for 03 months @ 2.5% and swaps the
same in to INR for 03 months for deployment in CPs @ 5.5%.
The 3 months premium on US $ 0.75%. the margin generated by
the bank in the transaction is
a) 3%
b) 2.25%
c) 5.5%
d) non of these
ans:b
Bank borrow US $ for 3 months @ 2.5%
Same will invest in CP foe 3 months @ 5.5 %..
Then here gaining 3% by interest rate margin...
But when bank repay his borrowing in $..
So bank has pay 0.75 extra because US $ will become costly by 0.75%..
US $ is at premium. .
So it will reduce bank gain by 0.75 %..
3.0% - 0.75 % = 2.25
54. A bank makes provision in account with out standing balance
of Rs 100 Crs (Risk Weight 150%) of Rs 30 Crs. The amount
that will qualify for Tier ii capital is
a) Rs 1.25 Crs
b) Rs 30 Crs
c) Nil
d) Non of these
ans is c
55. A company enjoys cash credit account with a bank . HE also has a
term looan account with o/s balance of Rs 15 Crs as on 31-03-2010 the
bank has also subscribed to the bonds issued by the borrower company
amounting to Rs 3 Crs. As on 31-03-2010 the CC account with o/s balance
of Rs 1.20 Crs is required to be classified as NPA there is no default in
payment of interest and installment in the term loan and bonds. The amount
that will become NPA on account of this borrow company is
a) Rs 1.20 Crs
b) Rs 16.20 Crs
c) 19.20 Crs
d) none of these
ans: c = 15+3+1.20=19.20
56. A bank has deposits worth ZMW 3,00,000 billion. The interest rate on
this is 12%. SRR to be maintaioned by the bank is 8% effective cost to
deposit is....
1) 12% 2) 15.23%
3) 13.04% 4) 14.66%
Ans: 3 From 300000
8 % should be made for SLR requirements
So available fund for making loans(asset)
= 300000 - 8% of 300000
= 300000 - 24000
= 276000
For this fund 276000
Bank is paying 12 % on 300000
Cost of fund is 36000
So making no loss ..
Bank has to lend money at that interest rate..
Which will cover this cost of funding that is 36000
36000 = 276000 × r /100
36000/276000 = r / 100
0.1304 = r / 100
r = 13.04 %
57. in a loan a/c the balance outstanding is 4.20 lacs and a cover of 75% is
available from CGFTMSE .the a/c has been doubtful since 25.08.2009.and
the value of security held is 1,50,000.the total provision in the a/c as on 31.03.2013 will be
1.2,10,000 2.2,17,500
3.1,26,000 4.2,65,000
Answer should be 2
Explanation ...
Outstanding. .balance. . Is .....420000
Security available is..
150000
CGFTMSE...on remaining amount
Which is. . = 420000- 150000
= 270000
Coverage is only 75 %..
So uncovered amount. .
We will take as a Provisioning. . Which is ..
= 25% of 270000
= 67500
Since loan is in doubtful category for more than 3 years
So we will take 100 % Provisioning for security value. . Which is.
= 150000
So totality. .
Provisioning is.. = 150000 + 67500
= 217500
58. A customer covers its receivable under exchange fluction risk cover
scheme of ECGC . On due date the currency appreciate by 45%. The customer will gain on the transaction due to currency fluction.
a) 45%
b) 12%
c) 10%
d) 2%
Ans: bAny loss or gain..
Within the range of 2 % to 35%..
Will go in ecgc account. .
Thatswhy. .
Gain of 45%
Of that...33% will go in ecgc account. .
So profit only. .12%..
For customer
59. A claim of Rs 45 lacs has been settled by ECGC in favour of a bank
againt default of Rs 60 lacs. Subsequently the bank realizes Rs 20 lacs collaterals available to it.What is the loss suffered by the bank on this loan
? a) Rs 10 lacs
b) Rs 5 lacs c) Rs 20 lacs
d) Non of these ans: A Because of ecgc settled the 45 lakhs on default of 60 lakhs. .
Which means. .ecgc settled the 75 % of default. .
here 20 lakhs is realised security. ...
Which means claim amount will be only..
40 lakhs towards ecgc...
And ecgc will settle obly 75 % amount. .
And 25 % will be bear by bank..
So loss of 25% of 40 lakhs.
Means loss 10 lakhs will bear by bank
60. A claim of Rs 45 lacs has been settled by ECGC in favour of a bank againt default of Rs 60 lacs. Subsequently the bank realizes Rs 20 lacs
collaterals available to it.What is thenet amount paid to ECGC ? a) Rs 30 lacs
b) 45 lacs c) 20 lacs
d) None of these Because of ecgc settled the 45 lakhs on default of 60 lakhs. .
Which means. .ecgc settled the 75 % of default. .
here 20 lakhs is realised security. ...
Which means claim amount will be only..
40 lakhs towards ecgc...
And ecgc will settle obly 75 % amount. .
And 25 % will be bear by bank..
So 75% of 40 lakhs.
Means 30 lakhs will settled by ecgc
61.
an advance of Rs 235000/- has been declared sub standard on 31/05/2012. It is covered by securities with realizable value of Rs 168000/-. Total
provision in the account as on 31/03/2013 will amount to:
1) 35250 2) 30200
3) 47000 4) 83800
right ans should be. ..2
Explanation. .
We take provision. .
10 % for secured portion.
20% for unsecured portion
= 10% of 168000 + 20% of of 67000 = 16800 + 13400
= 30200
62. The ovenight VaR of 1yr govt security yield is 0.20% with a current yield of 7.50%. A prospective seller of the security may expect the yield to be on
next day 1) 7.50%
2)7.70% 3) 7.30%
4) inadequate information to make the calculation.
right ans is B any one explain
In worst case scenario prospective seller of security may expect rise in
the yield so ans is 7.50+0.20=7.70......
Same case vl diffrent fr prospective buyer as he expect the yield to fall
so 7.70-.20=7.30
Qtn 63. Received order of USD 50000(CIF) to Australia on 1.1.11 when USD/INR Bill Buying Rate is 43.50. How much preshipment finance will be
released considering profit margin of 10% and Insurance and freight cost@ 12%. And margin is 25%.
ans
FOB Value = CIF – Insurance and Freight – Profit (Calculation at Bill Buying