Final PN-14 SFM Quiz 7

1. The following information is available for an investment proposal:

NPV at a discount rate of 8% = ₹1,550 lakh

NPV at a discount rate of 9% = ₹(-) 300 lakh

The Internal Rate of Return (IRR) of the proposal is:

2. A 5-year project has a Net Present Value (NPV) of Rs.550 lakh. The Present Value Interest Factor of Annuity (PVIFA) at 15% for 5 years is 3.352. Calculate the Equivalent Annual Benefit (EAB) of the project.

3. A project has the following details:

Annual cash inflow: Rs.50,000

Useful life: 4 years

Payback period: 2.305 years

Calculate the cost of the project.

4. The probability distribution of a project’s NPV is given below:

NPV (₹)         Probability

25,000            0.1

50,000            0.3

1,00,000        0.4

1,20,000        0.2

If the initial cost of the project is ₹2,00,000, the Profitability Index (PI) of the project is:

5. A project requires an initial investment of Rs.40 lakhs. The expected annual cash inflows are Rs.8.5 lakhs for 10 years. The cost of capital is 12%, and the annuity factor for 12% for 10 years is 5.6502. What is the Profitability Index (PI) of the project?

6. CNX Nifty is currently trading at 4300. An investor purchases a May futures contract at 4500. Each lot consists of 25 units, and the initial margin requirement is 6%.

What amount must the investor deposit as the initial margin? To what level must the Nifty futures rise to achieve a 5% gain on the initial margin?

7. In the futures market, when are call options and put options said to be ‘out of the money’?

8. Imran is bearish on the market and sells one January Nifty futures contract on January 15 for Rs.5,25,000. For this, he deposits an initial margin of Rs.36,250 with his broker. Each Nifty futures contract represents 200 Nifties. On January 25, the Nifty index closes at Rs.2,750.

What is Imran’s profit/loss on this position?

9. Sandhya is bearish about the market index. The Spot Nifty is currently at Rs.1,420. She decides to buy five three-month Nifty put option contracts, each with a market lot of 200 units, at a strike price of Rs.1,530 for a premium of Rs.40 per unit. At the end of three months, the Nifty closes at Rs.1,480. What will be Sandhy’s net payoff on this position?

10. A stock is currently trading at Rs.150. A European put option with a strike price of Rs.190 is selling in the market at a premium of Rs.30. What will be the time value of this put option?

11. You are given the following information about a stock: Strike Price: Rs.200

Current Stock Price : Rs.172

Risk-free Interest Rate (r): 5% p.a. Time to Maturity: 6 months (0.5 years)

What is the theoretical minimum price of a European put option?

12. A company’s share is currently trading at Rs.440. After 6 months, the share price will either increase to Rs.450 with probability 0.70 or decrease to Rs.420 with probability 0.30. A European call option exists with an exercise price of Rs.430. What will be the expected value of the call option at maturity?

13. A company wants to hedge its equity portfolio worth Rs.225 million using index futures. The contract size is 100 times the index, and the index is currently quoted at 6500. The portfolio has a beta of 0.5, while the beta of the index is considered as 1. How many index futures contracts should be traded to achieve the hedge?

14. A trader sells a call option. What is the maximum possible profit he can earn?

15. The current market price of a share of NLC Ltd is Rs.330. Over the next 3 months, the share price is expected to fluctuate between a maximum of Rs.400 and a minimum of Rs.300. The risk-free interest rate is 8% per annum. Using the risk-neutral method, calculate the value of a 3-month call option with a strike price of Rs.350.

Given: e0.02 =1.0202

16. The current price of OLA stock (Face Value Rs.10) on NSE is Rs.125. A 3-month futures contract on OLA is quoted at Rs.135. The expected annual dividend on the stock is 28% of the face value, payable before the contract expiry. The borrowing rate is 10% per annum.

17. The price of Reliance stock on 31st December 2024 was Rs.220, and the futures price for March 2025 on the same date was ₹230. Other relevant details are as follows:

Time to expiration: 3 months (0.25 year) Borrowing rate: 15% p.a.

Annual dividend on the stock: 25% of face value, payable before 31st March 2025              Face

value of the stock: Rs.10

Calculate the futures price of Reliance stock on 31st December 2024.

18. UPI stands for        .

19. In India, all payments are regulated by                 .

20. Digital Finance Cube has          dimensions.

21. NFT stands for        .

22. Which of the following is not a component of Digital Finance Ecosystem?

23.                                   is unique. Non- fungible tokens can digitally represent any asset, including online-only assets like digital artwork and real assets such as real estate.

24. Which of the following is not a potential benefit of Central Bank Digital Currencies ?

25. Components of digital infrastructure includes which of the following?