NMIMS Global Access
School for Continuing Education (NGA‐SCE)
Course: Financial Institutions and Markets
Semester: III
Program (Old) : PGDBM / PGDFM /PGDBFM / PGDITM
Assignment Marks: 30
Instructions:
• All Questions carry equal marks.
• All Questions are compulsory
• All answers to be explained in not more than 1500 words. Use relevant examples, illustrations as
far as possible.
• All answers to be written individually. Discussion and group work is not advisable.
• Students are free to refer to any books/reference material/website/internet for attempting their
assignments, but are not allowed to copy the matter as it is from the source of reference.
• Students should write the assignment in their own words. Copying of assignments from other
students is not allowed.
1. On December 31, 2005, Company A and Company B enter into a five year swap with the
following terms:
• Company A pays company B an fixed amount equal to 6% per annum on a
notional principal of $30 million.
• Company B pays company A an amount equal to one year LIBOR+1% per annum
on a notional principal of $30 million.
Show the notional cash flow between the parties for next 5 years if LIBOR is
• December’2006- 4.8%
• December’2007- 5.3%
• December’2008- 4.5%
• December’2009- 3.8%
• December’2010- 4.6%
2. Suppose an investor initially pays Rs 7000 towards the purchase of Rs.10,000 worth of
stock (Rs. 100 shares at Rs. 100 per share), borrowing the remaining from the broker.
The maintenance margin is set to be 30%.The initial percentage margin is 70%.
Calculate the percentage margin in each caseand also mention will the investor get a
margin call if:
a) If the price of the stock falls to Rs. 40
b) If the price of the stock falls to Rs 41
c) If the price of the stock falls to Rs. 42
What will happen if the investor fails to provide the required funds on time.
*****************
School for Continuing Education (NGA‐SCE)
Course: Financial Institutions and Markets
Semester: III
Program (Old) : PGDBM / PGDFM /PGDBFM / PGDITM
Assignment Marks: 30
Instructions:
• All Questions carry equal marks.
• All Questions are compulsory
• All answers to be explained in not more than 1500 words. Use relevant examples, illustrations as
far as possible.
• All answers to be written individually. Discussion and group work is not advisable.
• Students are free to refer to any books/reference material/website/internet for attempting their
assignments, but are not allowed to copy the matter as it is from the source of reference.
• Students should write the assignment in their own words. Copying of assignments from other
students is not allowed.
1. On December 31, 2005, Company A and Company B enter into a five year swap with the
following terms:
• Company A pays company B an fixed amount equal to 6% per annum on a
notional principal of $30 million.
• Company B pays company A an amount equal to one year LIBOR+1% per annum
on a notional principal of $30 million.
Show the notional cash flow between the parties for next 5 years if LIBOR is
• December’2006- 4.8%
• December’2007- 5.3%
• December’2008- 4.5%
• December’2009- 3.8%
• December’2010- 4.6%
2. Suppose an investor initially pays Rs 7000 towards the purchase of Rs.10,000 worth of
stock (Rs. 100 shares at Rs. 100 per share), borrowing the remaining from the broker.
The maintenance margin is set to be 30%.The initial percentage margin is 70%.
Calculate the percentage margin in each caseand also mention will the investor get a
margin call if:
a) If the price of the stock falls to Rs. 40
b) If the price of the stock falls to Rs 41
c) If the price of the stock falls to Rs. 42
What will happen if the investor fails to provide the required funds on time.
*****************
No comments:
Post a Comment