How to pass AIWMI CCRA-L2 exam with the help of dumps?

Question # 1

The longer the term to maturity of bond:

A. term to maturity and price of a bond are not related
B. The lesser is the risk associated with price of a bond
C. The higher is the return from the bond
D. The more risk in the price of a bond

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Question # 2

Satish Dhawan, a veteran fixed income trader is conducting interviews for the post of a junior fixed income trader. He interviewed four candidates Adam, Balkrishnan, Catherine and Deepak and following are the answers to his questions. Question 1: Tell something about Option Adjusted Spread Adam: OAS is applicable only to bond which do not have any options attached to it. It is for the plain bonds. Balkishna: In bonds with embedded options, AS reflects not only the credit risk but also reflects prepayment risk over and above the benchmark. Catherine: Sincespreads are calculated to know the level of credit risk in the bound, OAS is difference between in the Z spread and price of a call option for a callable bond. Deepark: For callable bond OAS will be lower than Z Spread. Question 2: This is a spread that must be added to the benchmark zero rate curve in a parallel shift so that the sum of the risky bond’s discounted cash flows equals its current market price. Which Spread I am talkingabout? Adam: Z Spread Balkrishna: Nominal Spread Catherine: Option Adjusted Spread Deepark: Asset Swap Spread Question 3: What do you know about Interpolated spread and yield spread? Adam: Yield spread is the difference between the YTM of a risky bond and the YTM of an on-the-run treasury benchmark bond whose maturity is closest, but not identical to that of risky bond. Interpolated spread is the spread between the YTM of risky bond and the YTM of same maturity treasury benchmark, which is interpolated from the two nearest on-the-run treasury securities. Balkrishna: Interpolated spread is preferred to yield spread because the latter has the maturity mismatch, which leads to error if the yield curve is not flat and the benchmark security changes over time, leading to inconsistency. Catherine: Interpolated spread takes account the shape of the benchmark yield curve and therefore better than yield spread. Deepak: Both Interpolated Spread and Yield Spread rely on YTM which suffers from drawbacks and inconsistencies such as the assumption of flat yield curve and reinvestment at YTM itself.Then Satish gave following information related to the benchmark YTMs: There is a 10.25% risky bond with a maturity of 4.75 year(s). Its current price is INR105.31, which corresponds to YTM of 9.22%. Compute Interpolated Spread from the information provided in the vignette:

A. 0.20% 
B. 0.21% 
C. 0.24% 
D. 0.22% 

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Question # 3

In Steepening short term rates ______relative to long term rate

A. falls
B. rises
C. is independent of each other
D. remains constant

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Question # 4

Basket Default swaps could be

A. reference sectors could be from the same economy
B. reference sectors could be the entire global space
C. reference securities are from the same sector

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Question # 5

__________Strategy consists of buying a bond with maturity longer than the investment horizon (for investor) or buying a long-maturity bond with short-term funding through repo (for speculator).

A. Barbell, Ladder and Butterfly
B. Yield Spread Anticipation
C. Rate Anticipation with Maturity Mismatch
D. Riding the yield curve

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Question # 6

Attributes of healthy cultural values exclude:

A. Experienced management.
B. Diversified sources of revenue.
C. Brand.
D. Healthy relationship with employees

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Question # 7

Two economies HardLand and SincereLand have provided following information with respect to their economies in USD Billion: Based on the above information which entity is better in terms of current account deficit %?

A. Sincereland by 583 bps 
B. Hardland by 56 bps 
C. Sincereland by 56 bps 
D. Hardland by 583 bps 

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Question # 8

Which of the following statements concerning having a CEO serve as chairman of the board is most accurate? Having a CEO also serve as chairman is considered:

A. poor corporate governance practice as having the CEO server as chairman is an inherent conflict when determining management compensation.
B. good corporate governance practice as the CEO is the best person to provide the board with information about the company’s strategy and operations.
C. cannot be determined
D. poor corporate governance practice as having the CEO and chairman serve as separate positions ensures a properly-functioning board.

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Question # 9

Satish Dhawan, a veteran fixed income trader is conducting interviews for the post of a junior fixed income trader. He interviewed four candidates Adam, Balkrishnan, Catherine and Deepak and following are the answers to his questions. Question 1: Tell something about Option Adjusted Spread Adam: OAS is applicable only to bond which do not have any options attached to it. It is for the plain bonds. Balkishna: In bonds with embedded options, AS reflects not only the credit risk but also reflects prepayment risk over and above the benchmark. Catherine: Sincespreads are calculated to know the level of credit risk in the bound, OAS is difference between in the Z spread and price of a call option for a callable bond. Deepark: For callable bond OAS will be lower than Z Spread. Question 2: This is a spread that must be added to the benchmark zero rate curve in a parallel shift so that the sum of the risky bond’s discounted cash flows equals its current market price. Which Spread I am talking about? Adam: Z Spread Balkrishna: Nominal Spread Catherine: Option Adjusted Spread Deepark: Asset Swap Spread Question 3: What do you know about Interpolated spread and yield spread? Adam: Yield spread is the difference between the YTM of a risky bond and the YTM of an on-the-run treasury benchmark bond whose maturity is closest, but not identical to that of risky bond. Interpolated spread is the spread between the YTM of risky bond and the YTM of same maturity treasury benchmark, which is interpolated from the two nearest on-the-run treasury securities. Balkrishna: Interpolated spread is preferred to yield spread because the latter has the maturity mismatch, which leads to error if the yield curve is not flat and the benchmark security changes over time, leading to inconsistency. Catherine: Interpolated spread takes account the shape of the benchmark yield curve and therefore better than yield spread. Deepak: Both Interpolated Spread and Yield Spread rely on YTM which suffers from drawbacks and inconsistencies such as the assumption of flat yield curve and reinvestment at YTM itself. Then Satish gave following information related to the benchmark YTMs: There is an 8.75% risky bond with a maturity of 2.75% year(s). Its current price is INR102.31, which corresponds to YTM of 8.52%. Compute Yield Spread from the information provided in the vignette:

A. 0.13% 
B. 0.00% 
C. 0.36% 
D. 0.27%

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Question # 10

The following information pertains to bonds: Further following information is available about a particular bond ‘Bond F’ There is a 10.25% risky bond with a maturity of 2.25% year(s) its current price is INR105.31, which corresponds to YTM of 9.22%. The following are the benchmark YTMs. Assuming the G-Sec has not changed from the time January 2013 to April 2013, what can you predict about the changes bond price and change in issues borrowing rates:

A. Decrease and Increase 
B. Increase and Increase 
C. Decrease and Decrease 
D. Increase and Decrease 

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Question # 11

Z spreads in Callable bonds include:

A. Does not include premium for credit risk and call option price for prepayment risk.
B. Premium for credit risk and call option price for prepayment risk in included.
C. Premium for credit risk is only included.
D. Premium for call option price for prepayment risk os only included.

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Question # 12

Mr. A shares details of two bonds as follows: Determine the interpolated spread for Bond X and Bond Y?

A. Bond X: 80 bps Bond Y: Negative 
B. Bond X: 35 bps Bond Y: 5 bps 
C. Bond X: 65 bps Bond Y: Nil 
D. Bond X: 20 bps Bond Y: 20 bps 

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Question # 13

During FY13, Small Bazar, a leading retail company has sold three of its prime properties for a sum of USD 24 Million. The same had a carrying value of USD 30 Million. Analyst had considered the same as operating income and considered it to be part of operating expenses. However, she realized her mistake and recorded the loss as non-operating loss. Which of the following ratio will not change despite the correction? A) EBITDA Margins B) Interest Coverage C) PAT Margins D) Gross Profit Margin

A. B, C & D
B. A, B & C
C. B, C
D. All Ratios will change

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Question # 14

A coupon bond is trading at 110% of the USD 1000 par value. If the last interest payment was made one month ago and the coupon rate is 12%, the accrued interest on this bond is_______

A. 110
B. 100
C. 120
D. 10

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Question # 15

Bank A has an imaginary portfolio of USD 1000 Million distributed towards following four entities: Bank A is stipulated to maintain a capital adequacy ratio of 11% on its risk weighted assets. It is being stipulated that the ratings for all the four entities is expected to be downgraded by 1 notch each. Estimate the amount of new capital required for Bank A?

A. USD 93.5 Million 
B. USD 38.5 Million 
C. USD 55 Million 
D. USD 850 Million 

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Question # 16

Ms. Mary Brown is a credit rating analyst. She had prepared a detailed report on one of her client, FlyHigh Airlines Ltd, a company operating chartered aircrafts in India. As she was heading for a meeting with her superior on the matter, coffee spilled over her set of prepared paper(s). As she was getting late for meeting, instead of preparing entire set she could recollect few numbers from her memory and reconstructed following partial financial table:   What is Total Income FY10 and FY12?

A. FY10: INR400 Million; FY12:INR575 Million 
B. FY10: INR525.56 Million; FY12: INR755.49 Million 
C. Insufficient Information to compute 
D. FY10: INR656.94 Million; FY12: INR821.18 Million

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Question # 17

“Following four entities operate in the Indian IT and BPO space. They all are into same segment of providing off-shore analytical services. They all operate on the labour costarbitrage in India and the countries of their clients. Following information pertains for the year ended March 31, 2013. The year FY13, was typically a good year for Indian IT companies. For FY14, the economic analysts have given following predictions about the IT Industry: A) It is expected that INR will appreciate sharply against other USD. B) Given high inflation and attrition in IT Industry in India, the wages of IT sector employees will increase more sharply than Inflation and general wage rise in country. C) US Congress will be passing a bill which restricts the outsourcing to third world countries like India. While analyzing the four entities, you come across following findings related to Glowing: Glowing is promoted by Mr.M R Bhutta, who has earlier promoted two other business ventures, He started with ABC Entertainment Ltd in 1996 and was promoter and MD of the company. ABC was a listed entity and its share price had sharp movements at the time of stock market scam in late 1990s. In 1999, Mr.Bhutta sold his entire stake and resigned from the post of MD. The stock price declined by about 90% in coming days and has never recovered. Later on in 2003, Mr. Bhutta again promoted a new business, Klear Publications Ltd (KCL) an in the business of magazine publication. The entity had come out with a successful IPO and raised money from public. Thereafter it ran into troubles and reported losses. In 2009, Mr. Bhutta went on to exit this business as well by selling stake to other promoter(s). There have been reports in both instances with allegations that promoters have siphoned off money from listed entities to other group entities, however, nothing has been proved in any court.” What will be impact of on the predictions A and B of the economic analysts, on companies:

A. Handsome: No Impact on sales; Margins may squeeze; Glowing: INR Sales may decline; margins may squeeze.
B. Handsome: INRSales may increase; margins may squeeze; Glowing: INRSales will increase; margins may squeeze.
C. Handsome: INR Sales may decline; margins may squeeze; Glowing: INR Sales may decline; margins may squeeze.
D. Handsome: No Impact on sales; Margins may squeeze; Glowing: No Impact on sales; Margins may squeeze.

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