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It is common knowledge that long duration bonds are more sensitive to interest rate risk. Your client has invested in two bond funds A and B. The modified duration of A is 7.2 and that of B is 4.5, these are held in quantum of Rs. 60 lakh and Rs. 20 lakh, respectively. You expect the Reserve Bank of India to raise the interest rates by 50 basis points when they meet next in a month’s time. If you switch three-fourth of Fund A into Fund B, what is the estimated value erosion of funds that could be saved?
Sudarshan has invested Rs. 30 crores in PMS. If the hurdle rate is 10% and annual fee rate is 0.50%. Profit sharing ratio is 25% above hurdle rate. First year profit is Rs. 5 crores, second year loss of Rs. 2 crores and in the third-year terminal value is 42 crores. First year average AUM was of Rs. 24 crores, in the second year was 17 crores and in the third year 23 crores. How much total fee client has to pay to portfolio manager if we assume fees are paid from separate A/c. For profit sharing ratio consider higher watermark during these years.
Sriram has invested Rs. 20 crores in PMS. If the hurdle rate is 10% and annual fee rate is 0.40%. Profit sharing ratio is 20% above hurdle rate. First year profit is Rs. 5 crores, second year loss of Rs. 2 crores and in the third-year terminal value is 30 crores. First year average AUM was of Rs. 15 crores, in the second year was 22 crores and in the third year 19 crores. How much total fee client has to pay to portfolio manager if we assume fees are paid from separate A/c. For profit sharing ratio consider higher watermark during these years.
Dhanlakshmi is planning to invest in 15-year maturity, 10% coupon bond (Face value Rs. 1000) paying coupons semi-annually having a put option of Rs. 1100 after eight years from the issue date. The bond is traded in market at a Yield to Maturity of 8.65% immediately after four years from the issue date. He invests the next day of coupon payment at YTM of 8.65%. The yield to put of this bond is
Bharti is planning to invest in 10-year maturity, 10% coupon bond (Face value Rs. 1000) paying coupons semi-annually having a put option of Rs. 1050 after eight years from the issue date. The bond is traded in market at a Yield to Maturity of 8.95% immediately after 3 years from the issue date. He invests the next day of coupon payment at YTM of 8.95%. The yield to put of this bond is
Your client who shall be retiring in a few months has for the last 10 years been investing in a strategic allocation, 80:20 fixed income to equity. The interest rate cycle is on the upturn. You observe that half of the fixed income portfolio is in government securities fund (G-Sec) and long duration bond fund. The other half of fixed income portfolio is in high accrual government schemes. The equity funds are mixed up among various types including equity linked saving schemes. What do you advise your client on altering asset allocation or adjusting products within the asset classes?
Assume the next dividend for XYZ stock will be $4 per share and investors require a 10% rate of return to purchase the stock. If the dividend for XYZ stock increases by 6% each year, what price should the stock be selling for today?
Saurabh bought XYZ shares 4 years ago @ Rs 95 per share. She wants your advice on whether to sell the shares or hold for a further period. The current market price of the share is Rs 210. Saurabh received a Rs 15 per share dividend on XYZ shares in the previous year. The dividend is expected to grow 5% year-on-year. The beta of XYZ is 0.80. You use the dividend discount model to evaluate the share. If the market return and the risk-free rate are respectively assumed to be 12% and 5%, what is the extent of undervaluation/overvaluation that you estimate on XYZ share?
Manish wants to use his accumulated investment of 5 lac in a mf scheme towards his son’s higher education 14 years from today. Scheme has given return of 10% in last five years. Cost of education is 14 lac today which was 20 lac years back. what is the per month amount needed to invest to achieve the goal.
A stock of face value Rs. 10 is currently priced at Rs 400.. The company paid a dividend of 150% in the current year and the absolute amount of dividend is expected to grow by an average of 6% year on year. It has a beta of 0.8. You expect the market to give a return of 10% while the risk-free rate is 5.5%. You find out the extent of undervaluation or overvaluation of the stock by dividend discount method, and state that
XYZ company has issued equity capital for a total of 20000 outstanding equity shares of face value Rs. 10 each. Mr. A owns 2000 shares of XYZ. The company issues bonus shares in the ratio of 1 share for every 2 shares held. What will be the ownership of Mr. A in XYZ after the allotment of bonus shares?
The annual dividend on preferred stock is Rs. 500. The market yield for similar-quality preferred stocks is 8%. The risk-free rate is 4%. Which is the closest to the preferred stock value?
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