Unit ko samjho · NISM Series V-D
Introduction to Interest Rate, Interest Rate Instruments and Fixed Income Markets
6 questions is unit mein
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- For this question, assume a government bond has no default risk. An investor may still need to sell this fixed-rate bond before maturity. Which risk remains directly relevant to the price received on that sale? Assumptions: Default risk is excluded only for this educational example.
- An illustrative deposit of ₹5,00,000 earns simple interest at 8% per year for 90 actual days. Its agreed day-count basis is Actual/360. Ignoring tax and fees, what interest amount accrues? Assumptions: The rate and Actual/360 convention are supplied contract assumptions.
- A bond has face value ₹10,00,000 and a 6% annual coupon paid semiannually. Its clean price is ₹98.40 per ₹100 of face value. Exactly 90 days of a stipulated 180-day coupon period have elapsed. Assuming no ex-coupon adjustment or charges, what full (dirty) amount does the buyer pay? Assumptions: The coupon-period fraction is exactly 90/180 as supplied.
- Immediately after a coupon payment, a two-year bond has face value ₹1,000 and pays an 8% coupon once a year. It repays face value with the second coupon. If the required yield is 10% with annual compounding and default is ignored, what is its value today, rounded to two decimals? Assumptions: Annual coupon and compounding conventions are supplied. Valuation is immediately after a coupon.
- Annual spot yields for comparable default-free instruments are 7.0% at one year, 6.2% at five years and 5.8% at ten years. Which description best fits these observations? Assumptions: The yields are illustrative observations for comparable instruments.
- A bond portfolio is worth ₹20,00,000 and has modified duration 4.0. Estimate its loss if yields rise in parallel by 0.40 percentage points. Use percentage price change ≈ −modified duration × yield change in decimal form, and ignore convexity. Assumptions: This is a first-order estimate for a parallel yield shift.
Zaroori ideas
Practice bank se · 1
For this question, assume a government bond has no default risk. An investor may still need to sell this fixed-rate bond before maturity. Which risk remains directly relevant to the price received on that sale? Assumptions: Default risk is excluded only for this educational example.
Even when default is excluded, a fixed-rate bond’s market price can change as required yields change. A sale before maturity exposes the investor to that price movement. Remember: A bond can have negligible assumed default risk and still have interest-rate price risk.
Hint Distinguish a promised maturity payment from the market price before maturity.
V-D-121Practice bank se · 2
An illustrative deposit of ₹5,00,000 earns simple interest at 8% per year for 90 actual days. Its agreed day-count basis is Actual/360. Ignoring tax and fees, what interest amount accrues? Assumptions: The rate and Actual/360 convention are supplied contract assumptions.
Interest = ₹5,00,000 × 0.08 × 90/360 = ₹10,000. The agreed day-count convention controls the time fraction. It is not automatically 90/365. Remember: An annual interest rate must be paired with its specified day-count basis.
Hint Multiply principal by the annual rate and by 90/360.
V-D-122Practice bank se · 3
A bond has face value ₹10,00,000 and a 6% annual coupon paid semiannually. Its clean price is ₹98.40 per ₹100 of face value. Exactly 90 days of a stipulated 180-day coupon period have elapsed. Assuming no ex-coupon adjustment or charges, what full (dirty) amount does the buyer pay? Assumptions: The coupon-period fraction is exactly 90/180 as supplied.
The clean amount is ₹10,00,000 × 98.40/100 = ₹9,84,000. One semiannual coupon is ₹30,000, so accrued interest is ₹30,000 × 90/180 = ₹15,000 and the full amount is ₹9,99,000. Remember: The full settlement price includes accrued interest in addition to the clean quote.
Hint Add the elapsed share of one semiannual coupon to the clean-price amount.
V-D-123Practice bank se · 4
Immediately after a coupon payment, a two-year bond has face value ₹1,000 and pays an 8% coupon once a year. It repays face value with the second coupon. If the required yield is 10% with annual compounding and default is ignored, what is its value today, rounded to two decimals? Assumptions: Annual coupon and compounding conventions are supplied. Valuation is immediately after a coupon.
Value = ₹80/1.10 + ₹1,080/(1.10²) = ₹965.2893, rounded to ₹965.29. Because the coupon rate is below the required yield, the bond is valued below face value. Remember: Each bond cash flow must be discounted from its own payment date.
Hint Discount the first ₹80 for one year and the final ₹1,080 for two years.
V-D-124Practice bank se · 5
Annual spot yields for comparable default-free instruments are 7.0% at one year, 6.2% at five years and 5.8% at ten years. Which description best fits these observations? Assumptions: The yields are illustrative observations for comparable instruments.
The observed yields fall from 7.0% to 5.8% as maturity increases. This is a downward-sloping or inverted pattern. Its shape alone does not guarantee a particular future price outcome. Remember: Describe the observed term structure before drawing qualified economic interpretations.
Hint Compare yield levels as maturity increases.
V-D-125Practice bank se · 6
A bond portfolio is worth ₹20,00,000 and has modified duration 4.0. Estimate its loss if yields rise in parallel by 0.40 percentage points. Use percentage price change ≈ −modified duration × yield change in decimal form, and ignore convexity. Assumptions: This is a first-order estimate for a parallel yield shift.
The approximate price change is −4 × 0.004 = −1.6%. Applying that loss to ₹20,00,000 gives ₹32,000. Convexity and non-parallel shifts are excluded. Remember: A basis-point or percentage-point move must be converted correctly before applying duration.
Hint Convert 0.40 percentage points into the decimal 0.004.
V-D-126