How was sfm paper today( may 2018) ??

I hv posted mistakes in sfm exam on my profile. U can refer.

bond sum was quite easy and solvable ..... the answer is that FV is Rs 1000.

Let X be the maturity value of bonds. Since the bonds are quoting at a discount yield that means the price of the bond today at 6% yield will be PV of X at 6% pa yield for 45 days ie

X x 1/(1+0.06*45/365) = 0.9927X.

Now they have given that if the yield increases by 200 bps ie to 8% the bond price will fall by Rs 2.5 i.e the new bond price at 8% yield will be 0.9927X - 2.5 ..................(A)

Further we know that at 8% yield the price of the bond will be PV of X at 8% yield pa for 45 days ie X x 1/(1+0.08*45/365) = 0.9902X ...................(B)

Equating (A) and (B) [Since both give the price of bond at 8% yield) and solving for X we get X = Rs.1000....... EASSSSSSSSY

 

Bond question was really easy ...

It is given that the bond has 45 days to maturity and is presently quoting at a discount yield of 6%.

Let the maturity value be X.

Price of Bond today = PV of X @ 6% pa for 45 days =X* 1/(1+0.06*45/365) = 0.9927X.

Now, It is given that if the yield increases by 200 bps ie 8% the price of the bond falls by Rs. 2.50. Hence the price of bond at 8% yield will be = 0.9927X-2.50 ...............(A)

We also know that price of bond at 8% yield is nothing but the PV of X @ 8% pa for 45 days ie X * 1/(1+0.08*45/365) which gives us 0.9920X.........................................(B).

Since (A) and (B) both give the price of bond when the yield is 8% they must be equal.

Hence 0.9927X-2.50 = 0.9920X; Solving for X we get X = Rs 1000.

Eaaaaasssssyyyyy!!!

 

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