Thursday, May 15, 2014

JAIIB/CAIIB - Interest Bonds and Capital dequacy Qust



1. JRD lent Rs.400/- to X for 2 years and Rs’250 to Y for4 years and received altogether from both Rs,360 as intt’ Find the rate of intt. Being calculation.     Ans  20%
2. A certain sum of money  at simple  intt. Amount  to  rs.1012 in two and half years  and toRs.1067/20 in 4 years rate of intt p.a is   Ans:- 3.63
3. Difference between simple interest and compound interest  for 3 years @10% is Rs.93. the sum is,             Ans 3000
4. Simple interest  on a certain sum for 4 years  is Rs. 200/-and 5 years is Rs.250 find the sum
5.  If  a sum at  compound   intt becomes  rs.16900 in 2years and rs.17576 in 3 years  find the rate of intt              Ans 4%
6. Difference  between compound intt. And simple intt. On sum of rs.4000/-for 3 years  at 5%p.a.  is
7. A sum  of money doubles itself  at compound  intt’ in 15 years  it will become 8 times  in                                          Ans 45 Years
8. A sum of money  amount to Rs.1180 and rs.1300 in 3 years  and 5 years  respectively   at simple intt.p.a. the sum is rs.-----  Ans 180/-


Bond Valuation

1.     What  are bonds
2.     Who issues bonds
3.     Types of bonds
·         Straight  Bonds
·              Zero Coupon  Bonds
·         Deep Discount Bonds
 Terms related to Bonds
Ø Face value  -----Straight bonds  and face value of   Zero Coupon bonds
Ø Coupon rate
Ø Maturity
Ø  Term to Maturity
Ø Market Value
Ø Discount rate
Ø Yield
Ø Current Yield
Ø Yield To Maturity
Ø Market value
4.     Bond Valuation
5.     Present  value  method   of Bond valuation
6.     Bond value  with Semi –annual Coupons (Interest)
7.     Yield to Maturity   Assumption   at the time of calculation of YTM
Bond once purchased   will be held till maturity
Cash flow   will   be received and there   will be no default
All cash flow are immediately   reinvested (else where) at the rate    which is equal to the   promised Y T M
Market value or Present value:-



CURRENT YIELD  ON BONDS
 Coupon Interest  every Year
-------------------------------------------
Current  Market Price


YTM Vs Current  Yield
Theorems for bonds value

Required rate of return   is  denote with  symbol     =Kd

Theorem

1.     When Kd= coupon rate 
result   price  is = par value
2.     When Kd > Coupon rate
result  value of bond  is < par value
3.     When Kd<coupon rate
value of bond   is > par value
4.     When Kd >coupon rate

discount on bond  declines  as maturity comes near
5.     When Kd < coupon rate

Premium  on bonds  reduces as maturity  comes near
6.     Bond prices  is inversely
proportional to its  yields  maturity




































BONDS Valuation
1)   Bond holders  are ------ of the business (Bond Issuer)
2)   A bond with  face value Rs’5000/-carrries  a coupon  rate  of 12% Market price  of this bond is quoted  at Rs.4500/- what is the current yield  of the bond
3)   Bond  is a type  of long  term,interest bearing note  payable on maturity
4)    When  the require rate of return  (kd) is greater than  the coupon rate  bond price  will trading at discount  to face value
5)   An secure bond  is a debenture  bond
6)   A convertible bond  is a bond  that can be converted  to cash  at any  given time
7)   A major advantage  of raising capital through  the sale  of bonds  is that  the interest  paid  on bonds  is a tax deductible  item
8)   The value  which bond holder gets  on maturity is called  Redemption value
9)   When  the expected  rate of return(market discount rate)is lesser  than coupon rate  bond price will rise
10)                     Zero coupon bonds do not  promise periodical intt.
11)                     Zero coupon bonds normally are available  at discount  to their face value
12)                     Zero coupon bonds  face value = redemption value
13)                     In perpetual bonds  , --no maturity date, and no maturity value  but intt, is  promised at definite rate  perpetually
14)                     Current yield on bonds  is measured  using  the current  price  and coupon .
15)                     YTM  of a bond  is its internal rate of interest
16)                     The concept  of Duration  is also called  Macaulay’s duration
17)                     Duration of bond is less than its maturity  period  Or term
Ans:-1 creditor   2.  13.33% 3. False   4.True   5.True 6. True  7. False       8.  TO 17   TRUE

                                                 CAPITAL ADEQUACY NORMS
TEST YOUR UNDERSTANDING

Q1.  The RBI has asked banks in India having overseas presence to implement the Basle Capital Accord      II from      --------.

Q2.  The Basle Committee on Banking Supervision came out with the Basle Accord II             during the year___

Q3.      The capital required to be maintained by a bank as per the Capital Adequacy     requirement is called      the___ capital.

Q4. The Basle Accord II rests on three pillars namely Minimum Capital                             Requirement, Supervisory      Review and___        


Q5.       The total amount of Tier II capital can be maximum___% the total amount of the Tier I Capital.


Q6.    For the purpose of including in Tier II capital the Revaluation reserve should be discounted at_____________________________________________________ ___%.

Q7.    The maximum subordinated debt to be included in Tier II Capital is     % of the Tier II capital.

Q8.        The maximum amount a bank can invest in the subordinated debt capital of  other  banks   is      restricted    to           % of its capital.

Q9. The maximum amount of perpetual bonds [IPDI] should not exceed ___
Capital of the issuing bank.


Q10.      For computing capital requirement against Credit risk, RBI has stipulated that banks should follow   the       Approach.

Q11.     For computing capital requirement against operational risk, RBI has  stipulated   that   banks should      follow     the          Approach.

Q12.     The committee which recommended for maintenance of capital adequacy norms by banks in all countries is known as       committee.

Q13.      Banks in India have been directed by RBI to maintain a minimum capital adequacy ratio of___________________________________________________________ %.

Q14.      As per RBI guideline, banks are required to maintain a risk weight of__   % in respect of personal  loans and credit card exposures.

Q15.     As per RBI guideline, banks are required to maintain a risk weight of     --------- % in respect of their  exposure to commercial real estates.

Q16.     As per RBI guideline, banks are required to maintain a minimum haircut of-------------% in case of gold  and main index equity which are taken as credit risk mitigants.

Q17.     As per RBI guideline, out of these securities namely Gold, Term Deposit, KVP and NSC the one  which cannot be considered as a credit risk mitigant is  .

Q18. Name the four external credit rating agencies which are in the approved list of the RBI for providing rating of accounts for the purpose of capital adequacy.

 Q19.      Name the three external credit rating agencies which are in the approved list of the RBI for
providing international rating of accounts for the purpose of capital adequacy.

Q20.      In case of cash credit account the credit conversion factor [CCF] for the un-drawn amount is_________________________________________________________ __%.

Q21.      As per the Basle II accepted by RBI all loans to staff fully covered by superannuation benefit or mortgage of house will attract a risk weight of    %.

Q22.      As per the Basle II accepted by RBI, a credit account to be included in Regulatory Retail Portfolio will be maximum limit of Rs.    .

Q23.      As per the Basle II accepted by RBI, all loans for purchase of residential property with a Loan to Value Ratio of more than 75% will carry risk weight of___.

Q24.     As per the RBI guidelines all Indian banks having operational presence outside India have to              operationalise the Internal Capital Adequacy Assessment Process [ICAAP] from       .
  ANS.

1-31.3.08,   2-2004,    3-   regulatory,         4-  market disclosure,    5-100%,      

6-55%,    7-   50%,      8-10%,                     9-15%,                    10-Standardised approach,     

11-    Basic Indicator Approach,         12-      Basle Committee on Banking Supervision,         
  
 13-     9%,               14-    125%,              15-  100%,       16-   15%,             17-   NSC,   

18-CARE, CRISIL, FITCH India, ICRA,     19-Fitch, Moody's, Standard and Poor, 

 20-20%,            21-20%,           22-five crore,                   23-100%,                24-March 31, 2008.


 In case of housing loan
LTV Ratio
Sanction amount of Loan
Risk weight
LTV =< 75%
Upto Rs.30 lac
50%
LTV=<75%
>30lac <75 Lac
75%
LTV > 75%
Loan amount is less than rs.75 lac
100%
Irrespective  of LTV
Loan > Rs.75 lac
125%
LTV  IN CASE OF Housing loan should not exceed 80%