Fimmda Sums

FIMMDA - NSE DEBT MARKET
(BASIC) MODULE
FIMMDA – NSE DEBT MARKET (BASIC) MODULE
MATHEMATICAL QUESTIONS
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FIMMDA - V IMP. MATHEMATICAL QUESTIONS
Q1 – A 10% Govt. of India bond with a 5 year maturity is priced at a yield of 5%. Find the
DURATION of this bond.
( Assume semiannual coupon payments)
Options : 3.85 , 4.15 , 4.75 , 5.00
Solution :
Procedure for using Excel. (Note – Usage of Excel or similar software is allowed in exams)
- In Excel, click on ‘Formulas’ ; then on ‘FINANCIAL’ and then on ‘DURATION’.

You will see the foll table :
The maturity is 5 years. Since no dates are mentioned, we give the dates for 5 years as under :
Now we add the Coupon rate (10%), the Yield (5%)and Frequency (2).
Answer : The Duration comes to 4.15 years

Q2 - A 10% Govt. of India bond maturing on 10th Aug 2017 is having a YTM of 8.33% on 10 June
2015. Find the price of the bond.
( Assume frequency of 2, Basis as 4, par value of bond as 100 and day count as 30/360)
Options : 103.01 , 103.22 , 104.10 , 104.80
Solution :
Procedure for using Excel.
- In Excel, click on ‘Formulas’ ; then on ‘FINANCIAL’ and then on ‘PRICE’.

We get the foll table :

Adding the values as per the question we get :
Answer : We get the price as 103.22

Q3 - Find the Term to Maturity of a bond maturing on 18 June 2016 on date 10 March 2015.
Options : 1.02 , 1.27 , 1.58 , 1.88
Solution :
In Excel, click on Fx - ‘Insert Function’ ; then select category as ‘All’ and then select ‘DAYS360’.
After selecting DAYS360, we get the foll table :
From the question, input the data as under :
Term to Maturity = DAYS / 360
= 458 / 360
Answer = 1.27 Years

Q4 - A 10.35% GOI security is maturing on 30/6/2017 and its priced in the market on 16/5/2015
at Rs. 102.88. Find the YTM of the security.
( You can assume a frequency of 2 (ie. semi annual), a day count of 30/360, Par Value of the
security as 100 and basis as 4 )
Options : 6.8%, 7.1%, 7.8% , 8.8%
Solution –
In Excel, click on Fx - ‘Insert Function’ ; then select category as ‘All’ and then select ‘YIELD’
After selecting ‘YIELD’ we get the foll table :

From the question, input the data as shown under :
Answer - The YTM is 0.088 x 100 = 8.8%

Q 5 - If the rate for the 100-day bond is 5.6840%, and the rate for the 220-day bond is 6.7440%,
the rate for the 160-day bond will be ________ .
Options : 5.750%, 6% , 6.214 % , 6.705%
Solution :
Days = D1 (100), D2(160) and D3(220)
Rate = R1 (5.6840) and R2 (6.7440)
The Formula is : R1 + [ ( R2 – R1 ) X ( D2 – D1 ) ] / ( D3 – D1 )
Substituting the values :
= 5.6840 + [( 6.7440 – 5.6840 ) X ( 160 – 100 )] / ( 220 - 100 )
= 5.6840 + (1.06 X 60) / 120
= 5.6840 + 0.53
= 6.214
Ans - The Rate for 160 day bond will be 6.214.%

Q 6 - What is the price at which a treasury bill maturing on 10th Jan 2015 would be valued on Dec
31, 2014 at a yield of 7.2040 %?
Options : 98.50 , 99.25 , 99. 65 , 99.80
Solution :
FORMULA = 100/ {1+ [yield% * (No of days to maturity/365)]}
= 100 / { 1 + [7.2040% x ( 10 /365 ) ] } - (Days to maturity is the difference between the

two dates.)
= 100 / { 1 + [ .072040 x .0273 ]
= 100 / [ 1 + .00196 ]
= 100 / 1.00196
Answer = 99.80
Q 7 - A 3-day repo is entered into on July 10, 2007, on an 11.99% 2015 security, maturing on April
7, 2015. The face value of the transaction is Rs. 4,00,00,000. The price of the security is Rs. 118.50.
If the repo rate is 7%, what is the settlement amount on April 10, 2006 ?
(Note - Frequency - 2 and Basis - 4)
Options : 48637368 , 45675887 , 51287455, 47564448
Solution :
Settlement Amount = Transaction Value + Accrued Interest.
Transaction Value = 40000000 x 118.50 / 100

= 47400000
For calculating Accured Interest, first calculate the No. of Days using Excel.
We have to use the ‘ COUPDAYBS’ function in Excel. For this click on ‘Formulas’ and then on
‘Fx’ and then on COUPDAYBS
We get the foll screen :
Input the data from the question and we get the no. of days as 93.
Accrued Interest = 40000000 x 11.99% x 93/360
(40000000 x 11.99% = 4796000)
= 4796000 x 93/360
= 4796000 x 0.258
= 1237368
Answer : Thus the Settlement Amount is 47400000 + 1237368 = 48637368

Q 8 - A GOI security with coupon of 10.44%, maturing on 07/07/2015, is to be settled on 10/11/2014.

What are the number of days from the previous coupon date?
(Note - Frequency - 2 and Basis - 4)
Options : 123 , 148 , 108, 133
Solution :
We have to use the ‘ COUPDAYBS’ function in Excel. For this click on ‘Formulas’ and then on
‘Fx’ and then on COUPDAYBS
Input the data from the question
Answer = 123 Days.

Q 9 - A treasury bill maturing on 2th Feb-2014 is trading in the market on 27th Feb-2013 at a price of
Rs. 94.4646. What is the discount rate inherent in this price?
Options : 5.89% , 6.05% , 6.29% , 6.89%
Solution :
Yield = [(100-price) X 365]/ (Price X No of days to maturity)
First calculate the Days to Maturity using Excel. In Excel click on ‘Formulas’ , ‘Fx’ , and ‘DAYS360’ :
Input the data from the question as under :
The answer comes to 335. Since Excel takes into account only 360 days, so add 5 more ie. 335 + 5 = 340
days.
Yield = [(100-price) X 365]/ (Price X No of days to maturity)
= (100 – 94.4646) x 365 / 94.4646 x 340
= 5.5354 x 365 / 32117.96
= 2020.42 / 32117.96
Answer = 0.0629 = 6.29%

Q10 – If the rate for the 60-day bond is 7.542%, and the rate for the 90-day bond is 7.675%, the rate
for the 80-day bond can be found as _________.
Options : 7.59 , 7.63 , 7.69 , 7.67
Solution :
Days = D1 (60), D2(80) and D3(90)
Rate = R1 (7.542) and R2 (7.675)
The Formula is : R1 + [ ( R2 – R1 ) X ( D2 – D1 ) ] / ( D3 – D1 )
Substituting the values : 7.542 + [(7.675 – 7.542) x (80 – 60)] / (90- 60)
7.542 + (0.133 x 20) / 30
7.542 + 0.0886
Answer = 7.63
Q11 - As per the zero coupon yield curve the interest rates are :
1 year rate = 2%
2 year rate = 3%
3 year rate = 4%
4 year rate = 5%.
Find 3 year forward 1 year rate ?
Options : 7.8%, 8%, 8.58%, 9.02%
Solution :
We are required to calculate the interest rate for future period.
1 year rate 3 year forward = {[(1+4 year rate)^4/ (1+ 3 year rate)^3] -1}
= {[ (1+5%)^(4)] / [(1+4%)^(3)] }- 1
= {[ (1+0.05)^(4)] / [(1+0.04%)^(3)] }- 1
= {[ (1.05)^(4)] / [(1.04%)^(3)] }- 1
( Use Scientific Calculator of your PC. Input 1.05 , then x^y , then 4 = 1.2155. Similarly 1.04, then
x^y, then 3 = 1.1248 )
= ( 1.2155 / 1.1248 ) - 1
= 1.08 - 1
= 0.08 x 100 = 8%
Answer = 8 %
Q 12 - A 8.79 % GOI security matures on 17th June 2015 and is trading at a YTM of 7.5248% on 10th
Jan 2015.
Find the accrued interest on this security. The day count followed is Actual / 360 . ( Consider a semi
annual payment ie. Frequency is 2)
Options : 0.874 , 1.077 , 0.364 , 0.585
Solution :
1st Step to include the period or days from 10 Jan ‘15 and 17 June ’15 by using ‘COUPDAYBS’
function in Excel.
COUPDAYBS = 24
Formula for Accrued Interest :
= ( days since last coupon / 360 ) x coupon rate x 100
= ( 24 / 360 ) x 8.79% x 100
= 0.0666 x 0.0879 x 100
Answer = 0.585
Q 13 - The NSE – ZCYC estimate of the spot rate for term 8.5847 years is 4.8446 %. Calculate the
discounted value of a cash flow of Rs 100 receivable at the end of term ?
( Note - The NSECYC assumes interest rate is continuously compounded - use exponential function to
estimate the present value)
Options : 65.9796 , 69.7455 , 59.1144 , 71.6713
Solution –
First step is to find out effective interest rate of 4.8446% compounding on daily basis or continuous
For that we have to use ‘EFFECT’ function in Excel.

Input the data :
0.04963 indicates 4.963%

Second step is to calculate the Present Value (PV) of Rs 100
Using PV function in Excel –

Input the data as under -
Answer = 65.9796
Q 13 – Mr. Mehta has a portfolio of 3 bonds priced at 102, 98 and 106 and they have a duration of 5, 7
and 10. Calculate the change in value of the portfolio if the yield decreases by 50 bps. You can assume
parallel shift in yield curve.
Options : 11.28 , 10.42 , 12. 75, 9.66
Solution :
First calculate the Weighted Average Duration –
Value Duration
102 x 5 : 510
98 x 7 : 686
106 x 10 : 1060
----- ---------
306 2256
Weighted Average Duration = 2256 / 306 = 7.3725
Change in Value of portfolio = Value x Weighted Avg Duration x change in yield
= 306 x 7.3725 x 0.5 (%)
= 11.28
The Answer comes to 11.28

Practice Question Banks also available for :
NISM
NISM Series I: Currency Derivatives Certification Exam

NISM Series V A: Mutual Fund Distributors Certification Exam
NISM Series VI: NISM Series VI - Depository Operations Certification Exam
NISM Series VII: Securities Operations and Risk Management
NISM Series VII: Equity Derivatives Certification Exam
NISM Series III A: Securities Intermediaries Compliance certification Exam
NISM Series X A : Investment Adviser (Level 1) Certification Exam
NISM Series X B: Investment Adviser (Level 2) Certification Exam
NCFM
NCFM Financial Markets: A Beginners Module

NCFM Capital Market (Dealers) Module
NCFM Derivative Market (Dealers) Module
BSE
Certificate on Security Market (BCSM)


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FIMMDA - NSE DEBT MARKET

FIMMDA - V IMP. MATHEMATICAL QUESTIONS

( Assume semiannual coupon payments)

Options : 3.85 , 4.15 , 4.75 , 5.00

- In Excel, click on ‘Formulas’ ; then on ‘FINANCIAL’ and then on ‘DURATION’.

You will see the foll table :

Answer : The Duration comes to 4.15 years

Options : 103.01 , 103.22 , 104.10 , 104.80

Procedure for using Excel.

- In Excel, click on ‘Formulas’ ; then on ‘FINANCIAL’ and then on ‘PRICE’.

We get the foll table :

Adding the values as per the question we get :

Answer : We get the price as 103.22

Options : 1.02 , 1.27 , 1.58 , 1.88

Procedure for using Excel.

After selecting DAYS360, we get the foll table :

From the question, input the data as under :

Term to Maturity = DAYS / 360

Answer = 1.27 Years

Options : 6.8%, 7.1%, 7.8% , 8.8%

Procedure for using Excel.

After selecting ‘YIELD’ we get the foll table :

From the question, input the data as shown under :

Answer - The YTM is 0.088 x 100 = 8.8%

Options : 5.750%, 6% , 6.214 % , 6.705%

Days = D1 (100), D2(160) and D3(220)

Rate = R1 (5.6840) and R2 (6.7440)

Substituting the values :

= 5.6840 + [( 6.7440 – 5.6840 ) X ( 160 – 100 )] / ( 220 - 100 )

= 5.6840 + (1.06 X 60) / 120

Ans - The Rate for 160 day bond will be 6.214.%

Options : 98.50 , 99.25 , 99. 65 , 99.80

FORMULA = 100/ {1+ [yield% * (No of days to maturity/365)]}

= 100 / { 1 + [7.2040% x ( 10 /365 ) ] } - (Days to maturity is the difference between the

= 100 / { 1 + [ .072040 x .0273 ]

(Note - Frequency - 2 and Basis - 4)

Options : 48637368 , 45675887 , 51287455, 47564448

Settlement Amount = Transaction Value + Accrued Interest.

Transaction Value = 40000000 x 118.50 / 100

We get the foll screen :

Accrued Interest = 40000000 x 11.99% x 93/360

(40000000 x 11.99% = 4796000)

Answer : Thus the Settlement Amount is 47400000 + 1237368 = 48637368

Q 8 - A GOI security with coupon of 10.44%, maturing on 07/07/2015, is to be settled on 10/11/2014.

Options : 123 , 148 , 108, 133

Input the data from the question

Answer = 123 Days.

Options : 5.89% , 6.05% , 6.29% , 6.89%

Yield = [(100-price) X 365]/ (Price X No of days to maturity)

Input the data from the question as under :

Yield = [(100-price) X 365]/ (Price X No of days to maturity)

= (100 – 94.4646) x 365 / 94.4646 x 340

= 5.5354 x 365 / 32117.96

Answer = 0.0629 = 6.29%

Options : 7.59 , 7.63 , 7.69 , 7.67

Days = D1 (60), D2(80) and D3(90)

Rate = R1 (7.542) and R2 (7.675)

7.542 + (0.133 x 20) / 30

4 year rate = 5%.

Find 3 year forward 1 year rate ?

Options : 7.8%, 8%, 8.58%, 9.02%

We are required to calculate the interest rate for future period.