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CAIIB-BFM-CASE STUDIES


An advance of Rs. 400000/- has been declared sub standard on 31/05/2015. It is covered by securities with realizable value of Rs. 250000/-. What will be the total provision in the account as on 31/03/2015?

a. 150000
b. 75000
c. 55000
d. 50000

Ans - b

Explanation :

Sub standard assets will attract provision of 15 % for secured portion and 25 % for unsecured portion. Please refer “http://rbidocs.rbi.org.in/rdocs/notification/PDFs/62MCIRAC290613.pdf”
Page - 25, Para – 5.4. So,

= 15% of 250000 + 25% of of 150000
= 37500 + 37500
= 75000

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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
b

Explanation.

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

So taking both the transactions,
4000-2000 = 2000 (Profit of Rs. 2000)

 

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