BFM- Numericals

Qtn 01 Probability of occurrence=4

Potential fin impact=4
Impact of internal control=0%
What is the esteemated level of operational risk?
A.3
B.2
C.0
D.4

=(4*4*(1-0))square.5=4 so ans is d look for page295 bf

Case study

Q2 you have given the following information, in summary about the profit & loss a/c of the
c bank

Interest earning Rs 120000 cr

Other income Rs 1800 cr
Profit on sale of fixed assets Rs 120 cr
Income from sale of third party products Rs 80 cr

On expences sie
Interest expenses are Rs 8200 cr
Operating expences Rs 3400 cr
Provisions of Rs 1600cr

Answer following

Q 2a- operating profit for the bank….

A Rs 800cr
B 4400 cr
C 2400 cr
D 2800 cr
Ans: c
Q2b- Gross income for the purpose of working out capital charge for operational risk under
Basel II would be
A 6000 cr
B 4400 cr
C 4000cr
D 2600cr
Ans: a
Q2c-Under basic indicator approach the bank would be required to allocate capital for
operational risk under Basel-ii based on operations for one year as.
A 900 cr
B 600 cr
C 300 cr
d 1200cr
ans;a
Q2d-The risk weighted assets for operational risk under basel-II in the above case would be:
A 11250 cr
B 90000 cr
C 5000 cr
D 6000cr
Ans: a
Q2e-The allocation of capital for market risk under basel _II would be.
A 296 cr
B 592 cr
C 444 cr
D Insufficient data to calculate the capital required
Ans:d

Q3 Data relating to balance sheet as on 14 mar 2013 banks reveals its capital at Rs 110 cr
reserve 2150 cr demand deposit 6500cr, SB deposit 20500 cr , term deposits from banks
1300 cr, term deposit from public 30800 cr borrowing from RBI nil, borrowing from other
institutions 200 cr, refinance from NARARD 150 cr, bills payable 50 crinterest accured 20
cr sub ordinatted debt 200 cr and credit balance in suspance a/c 30 cr (Total Being 63000)

Q Total amt of liabilities not to be included in computing DTLs in RS

A 3250 cr
B 3300 cr
C 4600 cr
D 4700 cr
Ans: d ( 1100+2150+150+1300=4700)
In time liabilities capital and reserve + refinance from NABARD + term deposit of banks
not to be included

Q3a Total amount of DTL on which CRR is to be maintaind

A 58100 cr
B 63000 cr
C 58300 cr
D 67100 cr
Q3a Ans: c (6500+20500+30800+200+50+20+200+30=58300 other than those not included
while cal culating DTL

Q3b Bank would required to maintain average CRR amounting to , if the rate of CRR is 5%
A 2915
B 2905
C 1749
D 3150
Ans: A 5% of amt of DTL that is 58300 and 5% is 2915 ans
Q4 NET WORTH RS. 1500 CRS
T1 + T2 CAPITAL RS 3500 CRS
RSA RS 22500 CRS
RSL RS 21000 CRS
DA ( WT MODIFY DURATION OF ASSETS 1.80
DL ( WT MODIFY DURATION OF LIABILITY 1.10

Q-1, DURATION OF GAP FOR BANK IS ESTAMATED AT

A) 0.77 0.73 C) 0.62 , D) NONE

Q-2 LAVERAGE RATIO IS

A) 6.43
B) 15
C) 14.33
D) 6.14

Q-3 MODIFY DURATION OF EQUATY IS

A) 4.97
B) 3.99
C) 3.68
D) 9.56

Case study 5
Q -The balance sheet of x bank provide the following information as on 31 mar 2013 Rs ,
Cr) capital 1000, reserves-6000, current account deposit 30000, saving bank deposit 3000,
term deposit, term deposit 30000 and borrowings 3000 on the assts side the cash -6900 ,
bal with banks-15000, investment-15000 , bills purchased =-20000, cash credit-20000, term
loans-20000 and fixed assets 3100. Total-100000. Earning assets out of tatal assets are
90000 cr .
Cash credit , bill purchased and investments are affected by change in interest rate. Term
loans carry fixed interest rate . SB an d TD are affected by change in interst rate.

Q Rate sensitivitive assts of the bank are

A 55000
B 75000
C 85000
d none
ans; a
Q 5 A Rate sensitive liabilities of the abnk are

A 63000
B 93000
C 60000
D none
Ans::c
 Q5b- the above bank has….
A positive gap
B negative gap
C marginal gap
D zero gap
Ans:b

Q5c-Tier-I capital of the bank

A 1000
B 7000
D 10000
D none
Ans:b

7 If there is an assets of rs 120 only in the doubt ful-I cat and the realization value of security
is rs 90 only , what will be the provision requirement.
A Rs 48
B 57
C 39
D 75

Ans : 48 since it a doubtful-I cat so 20% of realization value Rs 90 i.e Rs 18 and 100% of short
Fall that is 120-90= 30 so ans will be 30+1-8= 48

9. If there is an assets of rs 120 only in the doubt ful-II cat and the realization value of security
is rs 90 if above mentioned asset in doubtful-ii category tha..
A 39
B 57
C 66
D 75

Ans : b since it a doubtful-II cat so 30% realization value of Rs 90 i.e Rs 27 and 100% of
short Fall that is 120-90= 30 so ans will be 30+27= 57
10 If there is an assets of rs 120 only in the doubt ful-III cat and the realization value of
security is rs 90 if above mentioned asset in doubt-III than
A 120
B 48
C 57
D 108
Ans : a since it a doubtful-III cat so 100% of realization value Rs 90 i.e Rs 90 and 100% of short
Fall that is 120-90= 30 so ans will be 90+30=120

11. A preshipment account above 3 years as on mar 31 2004 has debit balance of Rs 4 lakh.
Principle security value is 1.50 lakh and ECGC cover is available at 50 % what provision will be
made on the a/c as on 31.05.2025 .
A Rs 2.15 lac
B 2.0 lac
C 1.92 lac
D 2.25 lac

Ans : a do know pl.. solved any body I m unable

12. A/C of ABC has become doubtful with balance of Rs. 6 lac . the collateral security value Is Rs
3 lac and that of principle security s 2 lac. Guarantors worth is RS 10 lac . A/c is in more than 1

Yr and up to 3 yr doubtful category . What will be amount of provision as on mar 2013.

A Rs 1.50 lac
B 2.50 lac
C 1.80 lac
D 3.0 lac

Ans : B since it was more than two yr in boubtful category so it should be treated as boubtful-
II cat and allow 30% of realisarion value that is 3+2=5 , 30% of 5 will be Rs 1.50 lac and 100%
of short fall that is 6-5=1 lac so 1.50+1.0=2.50 lac ans

13. provisions to be made for a standard asset....teaser housing loan

0.25%
0.40%
1%
2%

Ans: 2%

Case stusy on bal sheet

14. ABC co has following data as on 31-03-2013 Value in cr

Paid up capital (for 2 carore share with face value of Rs 10)… 20

Reseve ………………………………………………………………………60

Long term loans……………………………………………………………...80

PBIDT……………………………………………………………………… 50

Paid interest………………………………………………………………….12

Depreciation…………………………………………………………………10

Tax……………………………………………………………………………08

Price earnig ratio…………………………………………………………….10

On this basis ans following qtn

14 A. Its net profit would be…………

A Rs 38 cr

B 40
C 42

D 20

Ans: d PBIDT-I-D-T = profit 50-12-10-8 = 20 cr

14B Book value of shares of the company as on 31-03-2013

A Rs 10 cr

B 30

C 40

D 80

Ans: c = paid up capital+ reserve/ no of shares = 20+60/2=40 ans

14C The earning per share would be…..

A Rs 40 cr

B 30

C 20

D 10

Ans:d EPS=NPAT/paid up capital* face value =20/20 *10=10 ans

14D Market price of the share of the co..

A Rs 50 cr

B 100

C 200

D 300

Ans: b ( PER * EPS= given 10*10= 100 ans)

15. Given that Tier I capital is Rs. 500 crores and Tier II capital Rs. 800 crores and further given that RWA
for credit risk Rs. 5000 crores, capital charge for market risk and operational risk Rs. 200 crores and Rs.
100 respectively, answer the following questions if the regulatory CAR is 8%.

What are the total risk weighted assets?

1) Rs.7250 crores

2) Rs. 8750 crores

 3) Rs. 9000 crores

4) Rs. 7800 crores

Q16 An amount of Rs. 10,000 is available with Bank A for investment. The various investment options
being considered by the Bank along with the Yield and Risk weights have been given as under:

Option-1 Option-2 Option-3 Option-4

Investment in Govt. Securities Yield 7% and Risk weight 10000 4000 3000 3000
0%
Lending to AAA rated Customers Yield 8% p.a. and risk - 6000 3000 3000
weight 20%
Lending to AA rated Customers Yield 10% p.a. and risk - - 4000 2000
weight 50%
Lending to A rated Customers Yield 12% p.a. and risk - - - 2000
weight 100%
Total 10000 10000 10000 10000

Q-17The amount of capital required @ 8% in case the Bank invests under Option 2 will be -----

1) Rs. 9.60 2) Rs. 96 3) Rs. 960 4) Rs. 9,600

Q 18. A 5-year 6% semi-annual bond @ market yield of 8%, having a price of Rs. 92, falls to Rs. 91.80 at
a yield of 8.10%, what is Basis Point Value (BPV)?

1) Rs. 0.20 2) Rs. 0.10 3) Rs. 0.02 4) Rs. 0.05

Q19. Given that Tier I capital is Rs. 500 crores and Tier II capital Rs. 800 crores and further given that
RWA for credit risk Rs. 5000 crores, capital charge for market risk and operational risk Rs. 200 crores and
Rs. 100 respectively, answer the following questions if the regulatory CAR is 8%. What are the risk
weighted assets for market risk?

1) Rs. 1000 crores 2) Rs. 1500 crores 3) Rs. 2000 crores 4) Rs. 2500 crores

Q20. Given that Tier I capital is Rs. 500 crores and Tier II capital Rs. 800 crores and further given that
RWA for credit risk Rs. 5000 crores, capital charge for market risk and operational risk Rs. 200 crores and
Rs. 100 respectively, answer the following questions if the regulatory CAR is 8%.

What is the total capital adequacy ratio? Refer pg 224 bfm solved same ques
1) 0.1486 2) 0.1111 3) 0.1143 4) 0.1282

Q
On 12th Feb, received Import Bill of USD-10000. The bill has to retired to debit the account of
the customer. Interbank
spot rate =34.6500/7200. The spot rate for March is 5000/4500. The exchange margin for TT
selling is .15%
and Exchange margin for Bill selling is .020%. Quote rate to be applied.
Solution
Bill Selling Rate will be applied.
Spot Rate + Exchange margin for TT Selling + Exchange margin for Bill selling =
34.7200+.0520+.0695 = 34.8415

Q
Mr. Raj purchases a call option for 400 shares of A with strike price of Rs. 100 having maturity
after 03 months for Rs. 20 and also buy a put option for 200 shares of B with strike price of Rs.
200 having maturity after 03 months for Rs. 30. On maturity, shares of A were priced at Rs. 130
and shares of B were priced at Rs. 180. What is the profit/lost for the individual on the
transaction (without taking the interest cost and exchange commission into calculation)?

a. Profit ...of Rs. 4000

b. Profit of Rs. 2000
c. Loss of Rs. 4000
d. Loss of Rs. 2000

For A
Strike price 100 Premium 20 Spot price 130 Profit 130 - (100+20)= 10 per share
Total profit on A is 400 × 10= 4000

For B
Strike price 200 Premium 30 Spot price 180 loss 200-30-180= -10
Total loss 200 × -10 = -2000

In totality. .on portfolio = 4000 - 2000= 2000

Profit of 2000

ANS by MURUGAN
First one is a call option, so it is assumed that,
He will purchase 400 shares of A at a price of 100
Total value of shares is = 40000
Then he will sell the total shares in the market at a price of 130.
400 × 130 = 52000
But he paid the premium for call options @ 20 × 400 = 8000
So profit in this first transaction will be
52000 - 40000 - 8000
=4000 (Profit of Rs. 4000)
Second one is a put option, so it is assumed that,
He will sell 200 shares of A at a price of 200
Total value of shares is = 40000
Then he will buy the total shares in the market at a price of 180.
200 × 180 = 36000
But he has to paid Rs. 30 per share to buy put options.
=30 × 200 = 6000

So profit in this first transaction will be

40000 - 36000 - 6000
= -2000 (loss of Rs. 2000)

So taking both the transactions,

4000-2000 = 2000 (Profit of Rs. 2000)

Q
A bank borrows US $ for 03 months @ 3.0% and swaps the same in to INR for 03 months for
deployment in CPs @ 5%. The 3 months premium on US $ is 0.5%. What is the margin(gain/loss)
generated by the bank in the transaction?

a. 2%
b. 3%
c. 1.5%...
d. 2.5%

Bank borrow US $ for 3 months @ 3%

Same will invest in CP for 3 months @ 5%
So, it gains 2% by interest rate margin here.
But when bank repay its borrowing in $, it has pay 0.5% extra because US $ will be costly by
0.5% as US $ is at premium.
So it will reduce bank gain by 0.5%.
2.0% - 0.5 %
= 1.5%

Q
Mr. X purchases a put option for 300 shares of A with strike price of Rs. 2000 having maturity
after 02 months for Rs. 50. On maturity, shares of A were priced at Rs. 1900. What is the
profit/lost for the individual on the transaction (without taking the interest cost and exchange
commission into calculation)?

a. Profit of Rs. 30000

b. Profit of Rs. 15000
c. Loss of Rs. 30000...
d. Loss of Rs. 15000

This is put option, so it is assumed that,

He will sell 300 shares of A at a price of 2000
Total value of shares is = 600000
Then he will buy the total shares in the market at a price of 1900.
300 × 1900 = 570000
So profit of 30000 in the transaction. .
But he has to paid Rs. 50 per share to buy put options.
=300 × 50 = 15000
Total profit or loss = 600000 - 570000 - 15000
= 15000
(Make it simple: 300 * (2000-1900-50) = 15000)
Q
Mr. Raj purchases a call option for 500 shares of A with strike price of Rs. 140 having maturity
after 03 months at a premium of Rs. 40. On maturity, shares of A were priced at Rs. 180. Taking
interest cost @ 12% p.a., what is the profit/lost for the individual on the transaction?

a. Profit of Rs. 20000

b. Profit of Rs. 600
c. Loss of Rs. 20600...
d. Loss of Rs. 600