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1. Attempt the following and support your answer with necessary reasons: Aishwarya Ltd. proposed to issue 10,00,000 share warrants to its promoters. The share warrants give an option to buy shares at a predetermined price. From the following share price data, identify the price at which share warrants should be issued and the amount payable by the promoters at the time of allotment: (i). Closing price in the market on the relevant date: Rs. 340 (ii). The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the six months preceding the relevant date: Rs. 354 (iii). The average of the weekly high and low of the closing prices of the related shares quoted on a stock exchange during the two weeks preceding the relevant date: Rs. 350. (Dec-2013)(5 Marks) Ans. The given question is based upon preferential issue, which is regulated by SEBI (ICDR) Regulations, 2009. The relevant answers are: (i). Pricing of the issue: As per data given it is clear that the equity shares of the Aishwarya Ltd. (i.e. the company) is listed for 26 weeks or more. So the price of shares warrants on preferential issue shall not be less than the higher of the following: a) The average of weekly high and low of the closing prices of the related shares quoted on the stock exchanges during the twenty six weeks preceding the relevant date i.e Rs. 354. b) The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the two weeks preceding the relevant date i.e Rs. 350. So, the price of warrants shall not be less than Rs. 354 per share warrant. (ii). Upfront Payment on Warrants: The promoters are liable to pay at least 25% of the price of Share warrants i.e Rs. 88.50 (354x25%) per share warrant. This amount should be paid on the date of allotment of share warrant. Note: It is presumed that 6 months = 26 weeks. Settlement System Settlement is the process of netting of transactions and actual delivery/receipt of securities and transfer deeds against receipts/payment of agreed amount. It is necessary to make a settlement to know the net effect of a series of transaction during a given period. Settlement date is the date specified for delivery of securities between securities firms. For administrative convenience, a stock exchange divides the year into a number of settlement periods so as to enable members to settle their trades. All transactions executed during the settlement period are settled at the end of the settlement period. Settlement risk or principal risk is the risk that the seller of a security or funds delivers its obligation but does not receive payment or that the buyer of a security or funds makes payment but does not receive delivery. In this event, the full principal value of the securities or funds transferred is at risk.

FAQ s on Settlement Cycle UNDERSTANDING TRADE SETTLEMENT CYCLE India is one of the most advanced markets when it comes to settlement of trade. The domestic market follows a T+2 settlement cycle. India is one of the most advanced markets when it comes to settlement of trade. WHAT IS ROLLING SETTLEMENT? In a rolling settlement, each trading day is considered as a trading period and trades executed during the day are settled based on net obligations for the day. In India, trades in rolling settlement are settled on a T+2 basis i.e. on the 2nd working day after a trade. WHICH DAYS ARE CALCULATED FOR THE PURPOSE OF ROLLING SETTLEMENT? For arriving at the settlement day, all intervening holi, which include bank holi, exchange holi, Satur and Sun, are excluded. Typically, trades taking place on Monday are settled on Wednesday, Tuesday s trades are settled on Thursday and so on. Activity Day Trading Rolling settlement T Clearing Custodial confirmation and delivery generation T+1 working Settlement Securities and funds pay-in and pay-out T+2 working Post settlement Auction T+3 working Bad delivery reporting T+4 working Auction settlement T+5 working Rectified bad delivery pay-in and pay-out T+6 working Re-bad delivery reporting and pick up T+8 working Close out of re-bad delivery and funds pay-in and T+9 working pay-out For intraday traders, rolling settlement changes nothing. For institutional investors, who are forbidden to square off anyway, there would be no change. It is for retail investors who take leveraged positions across one night or more that rolling settlement has an impact. The funds and securities pay-in and pay-out are carried out on T+2 WHAT IS PAY-IN AND PAY-OUT? Pay-in day is the day when the securities sold are delivered to the exchange by the sellers and funds for the securities purchased are made available to the exchange by the buyers. Pay-out day is the day the securities purchased are delivered to the buyers and the funds for the securities sold are given to the sellers by the exchange. At present, the pay-in and pay-out happens on the 2nd working day after the trade is executed on the exchange, that is settlement cycle is on T+2 rolling settlement.

WHAT IS NO-DELIVERY PERIOD? Whenever a company announces a book closure or record date, the exchange sets up a no-delivery period for that security. During this period only trading is permitted in the security. However, these trades are settled only after the no-delivery period is over. This is done to ensure that investor s entitlement for the corporate benefit is clearly determined. WHAT IS AN AUCTION? On account of non-delivery of securities by the trading member on the pay-in day, securities are put up for auction by the exchange. This ensures that buying trading member receives the securities. The Exchange purchases the requisite quantity in auction market and gives them to the buying trading member. 2. Attempt the following and support your answer with necessary reasons: (Dec, 2013) a) A transaction of dematerialized equity shares took place on Wednesday, the 19 th March, 2014 at BSE. According to the compulsory rolling settlement, complete the following table with timeline of the settlement cycle: Activity Rolling settlement trading Custodial confirmation Delivery generation Securities and funds pay in Securities and funds pay out Valuation date Auction Auction settlement Day and date 3. The lending price of the security is Rs. 100. The transaction prices of the securities are (i) Rs. 100.25; and (ii) Rs. 99.50. You are required to calculate- (i). Lenders earning as fee; and (ii). Borrowers earning as rebate (Dec- 04)(3 marks each) Ans: Given that: Lending price of a security (SLP) = Rs. 100 Transaction prices are 100.25/99.50 Lenders of securities earns a fee if TP>SLP Borrowers of securities earns a rebate on the borrowing if TP>SLP (i). Calculation of lenders earning as fee: Transaction price of Securities = Rs. 100.25 Annualized yield = TP SLP x 365 x 100 SLP x 7 (ii). = (100.25-100) x 365 x 100 100 x 7 = 13.04% Calculation of borrower s earning as rebate:

Transaction price of securities = Rs. 99.50 Annualized yield = TP SLP x 365 x 100 SLP x 7 = (99.50-100) x 365 x 100 100 x 7 = 26.07% 4. The securities lending price (SLP) of a stock is Rs. 100 and the transaction price (TP) is Rs. 100.50. Calculate the annualised yield. What will be the annualized yield, if the transaction price (TP) is Rs. 99? Ans. 26.07%, 52.14% Yield Calculation MONEY MARKET The yield of a Treasury Bill is calculated as per the following formula: Y = (100 P) X 365 X 100 P X D Wherein Y = Discounted yield P = Price D = Days to maturity 5. Ajay purchases 8.4% Government of India Bonds, 2018 of face value of Rs. 20 lakh @ Rs. 102.50 for every unit of security having face value of rs. 100. The settlement is due on 13 th October, 2009. What is the amount to be paid by Ajay? (Assuming that interest is payable on 13 th May and 13 th November every year). (June,09)(5 Marks) Ans. Coupon rate 8.4% Year of maturity 2018 Face value of Rs. 20 lakh @ Rs. 102.50 Therefore, the principal amount payable is Rs. 20 lakh x 102.50 Interest for the period from 13.05.09 to 13.10.09 Month May 18 June 30 July 30 August 30 No. of

September 30 October 12 150 Interest payable = 20,00,000 x 8.40 x 150 = Rs. 70,000 360 x 100 Total amount to payable by Mr. X = Rs. 20,50,0000 + Rs. 70,000 = Rs. 21,20,000 6. ABC Ltd. wanted to issue commercial papers (CPs) worth Rs. 100 crore during March, 2014. For this, it obtained rating from three rating agencies and in the month of February, 2014, all the rating agencies gave A2 rating. But on 4 th March, 2014, one of the agencies revised its rating to A3 before the issue of CPs. As a Company Secretary, advise whether the company can issue CPs to raise money for a short period. (June, 14)(5 Marks) 7. A cooperative bank wishes to buy 91 Days Treasury Bill on Oct. 12, 2012 which is Maturing on Dec. 6, 2012. The rate quoted by seller is ` 99.1489 per ` 100 face values. The YTM can be calculated as following: The to maturity of Treasury bill are 55 (October 20, November 30 and December 5 ) YTM = (100-99.1489) x 365 x 100/(99.1489*55) = 5.70% 8. On 30 th October, 2005, Shan Co-operative Bank buys 91 treasury bill maturity on 24 th December, 2005. The rate quoted by the seller is Rs. 99.25 per Rs. 100 face value. Calcualte the yield percentage of the treasury bill. (June, 06)(5 Marks) Ans. As we know yield to maturity or YTM = (100-P) x 365 x 100 PxD Where P = Price = Rs. 99.25 D = Days to maturity = 55 Now putting these information into above equation, YTM = (100-99.25) x 365 x 100 = 5.01% 99.25 x 55 9. On 25th January, 2013, XY Bank purchased a 91-day treasury bill maturing on 16th March, 2013. The rate quoted by the seller is 99.25 per 100 face value. Compute the yield percentage of the treasury bill. (Dec, 14)( 3 marks) Ans. As we know yield to maturity or YTM = (100-P) x 365 x 100 PxD Where P = Price = Rs. 99.25 D = Days to maturity = 50 Now putting these information into above equation,

YTM = (100-99.25) x 365 x 100 = 5.52% 99.25 x 50 10. As on 1 st April, 2008 Cash Rich Ltd. has surplus cash for six months. It has following two options under consideration for investing the surplus cash (i). To invest in fixed deposit at the interest rate of 8% per annum payable quarterly; And (ii). To buy treasury bills of the face value of rs. 100 at Rs. 98.019 with maturity after six months. Presuming that the risk involved in both the options is identical, state giving reasons which option should be selected by the company for investing its surplus funds. (June, 08)(6 Marks) Ans. Option- (i): Investment in fixed deposits: Rate of interest = 8% p.a (quarterly payable) Quarterly Rate of interest = 8/4 = 2% per quarter effective rate of interest for 2 quarters. = [(1.02 x 1.02) 1] x 100 = 4.04% Option (ii) invest in T-Bills YTM = (100-P) x 365 x 100 PxD Where P = Price = Rs. 98.019 D = Days to maturity = 183 Now putting these information into above equation, YTM = (100-98.019) x 365 x 100 = 5.01% 98.019 x 183 = 4.03% Conclusion: It is more beneficial to invest in fixed deposits, because it gives return at a higher rate than T-Bills. 11. Define NAV and offer price. If Rahul invests Rs. 10,000 in a scheme that charges 2% front end load at an NAV of Rs. 10 per unit, what shall be the public offer price? (Dec,08)(5 Marks) Ans. (i)nav It stands for Net Assets Value which is the value of the assets of each unit of the scheme of mutual fund. It is computed as follows: NAV (Rs.) = Market value of Investment + Current Assets = Liabilities No. of outstanding units (ii)offer Price : It means public offer price, i.e. money payable by an investor for buying an unit of scheme of mutual fund. (iii) Public-offer Price is computed as: Public-offer Price = Net Assets Value 1-front end load In this question, NAV = 10 & FEL is 2%, So POP = 10 = Rs. 10.20 (1-0.02)

12. The redemption price of a mutual fund unit is Rs. 48 while the front end load and back-end load charges are 2% and 3% respectively. You are requested to calculate- (i) Net asset value per unit; and (ii) Public offer price of the unit. (June, 10)( 7 Marks) Ans. Information as per question Redemption price of Mutual Fund = Rs. 48 Front end Load = 2% @ 0.02 Back end Load = 3% or 0.03 Now, (i) Net Asset Value =? We know Redemption price = NAV/ (1+ Back end Load) Now putting figures with the help of question 48= NAV/(1+0.03) Or, 48 = NAV / (1.03) Or, NAV = 48 x (1.03) = Rs. 49.44 (ii) Public offer price = Net Asset Value (1-Front end value) = 49.44_ = 49.44 (1-.02).98 = Rs. 50.45 13. The redemption price of a mutual fund unit is Rs. 12 while the front end load and back end load charges are 2% and 3% respectively. You are required to calculatea) Net asset value per unit; and b) Public offer price of the unit. Ans. We know, We know, Redemption Price = NAV 1 + Back end load Rs. 12 = NAV 1 + Back end load 12 x 1.03 = 12.36 (ii) Public Offer Price = NAV 1 Front end load POP = Rs. 12.36 (1 Front end load) POP = 12.36/.98 = 12.61 14. The redemption price of a mutual fund unit is Rs. 48 while the front end load and back end load charges are 2% and 3% respectively. You are required to calculatec) Net asset value per unit; and d) Public offer price of the unit. (June, 14)( Marks 5)

15. Global Mutual Fund has launched a scheme named Grand Bonanza. The net asset value (NAV) of the scheme is Rs. 12 per unit; the redemption price is Rs. 11.65 per unit; and offer price is Rs. 12.50 per unit. You are required to calculatea) Front-end load charges; and b) Back-end load charges (Dec,04)(3 marks each) OR Super Mutual Fund has launched a scheme named Grand Bonanza. The net asset value (NAV) of the scheme is Rs. 12 per unit; the redemption price is Rs. 11.65 per unit; and offer price is Rs. 12.50 per unit. You are required to calculatea) Front-end load charges; and b) Back-end load charges (June,2015)(6 marks) Ans. Given, NAV = Rs. 12 Redemption Price = 2% Offer Price = 3% (i). Front End Load Charges: We know, Offer Price = NAV 1 Front end load Rs. 12.50 = Rs. 12 (1 Front end load) 1- Front end load = 0.96 Front end load =.04 or 4% (ii). Back End Load Charges: We know, Redemption Price = NAV 1 + Back end load Rs. 11.65 = 12 1 + Back end load 1+ Back end load = 1.03 Back end load =.03 or 3% 16. A unit of Evergrow Equity Fund is redeemed at Rs. 15, the exit load being 2.25%. Calculate the NAV. Ans. NAV = Redemption price (1 + Exit load) NAV = 15(1+.0225) = 15.34 17. Calculate the value of rights, if Number of rights shares offered 7,500 Number of shares held 2,500 Ex-rights price Rs. 20 Rights offer price Rs. 12

Face value of shares Rs. 10 (Dec, 05)(6 Marks) Ans. In case of Mutual fund, the value of right shares can be calculated by following the below mentioned formula i.e Where Vr = n ( Pex Pof) (1) m Vr = value of right N = no. of rights shares offered = 7,500 M = no. of original shares held = 2,500 Pex = Ex right Price: = Rs. 20 Pof = Rights offer Price = Rs. 12 Now, putting these values in equation (1) Vr = 7,500 ( 20-12) 2,500 = Rs. 24/- 18. Calculate the value of rights from the following information Number of rights shares offered 2,500 Number of shares held 1,000 Ex-rights price Rs. 18 Rights offer price Rs. 15 Face value of shares Rs. 10 (June, 15)(4 Marks) Ans. In case of Mutual fund, the value of right shares can be calculated by following the below mentioned formula i.e Where Vr = n ( Pex Pof) (1) m Vr = value of right N = no. of rights shares offered = 2,500 M = no. of original shares held = 1,000 Pex = Ex right Price: = Rs. 18 Pof = Rights offer Price = Rs. 15 Now, putting these values in equation (1) Vr = 2,500 ( 18-15) 1,000

= Rs. 7.5/- 19. The following information is given : No. of rights shares offered : 6,000 No. of shares held : 3,000 Ex-right price : 32 Rights offer price : 25 Face value of share : 10 You are required to compute the value of rights. (Dec, 14)(3 marks) Ans. In case of Mutual fund, the value of right shares can be calculated by following the below mentioned formula i.e Where Vr = n ( Pex Pof) (1) m Vr = value of right N = no. of rights shares offered = 6,000 M = no. of original shares held = 3,000 Pex = Ex right Price: = Rs. 32 Pof = Rights offer Price = Rs. 25 Now, putting these values in equation (1) Vr = 6,000 ( 32-25) 3,000 = Rs. 14/- 20. Safal Mutual Fund provides the following information related to one of its scheme: Size of the scheme Rs. 2,000 crore Face value of the units Rs. 10 per unit Number of outstanding units 200 crore Market value of fund s portfolio Rs. 4,200 crore Receivables Rs. 100 crore Accrued Income Rs. 100 crore Liabilities Rs. 150 crore Accrued expenses Rs. 275 crore You are required to calculate net asset value(nav) of the scheme and rate of return if a unit holder has purchased units at the NAV of Rs. 15 per unit and received a dividend of Rs. 2 per unit during the period. (Dec,06(Marks 6) Ans. NAV of the scheme, Calculation of Total Assets Rs. (crores)

Market value of portfolio funds 4,200 Receivables 100 Accrued income 100 (A) 4,400 Calculation of Total Liabilities Rs. (crores) Liabilities 150 Accrued Expenses 275 (B) 425 Calculation of Net Assets (A B) Rs. 4,400 Rs. 425 = Rs. 3,975 NAV (per unit) = Net Assets No. of o/s units 3,975 200 crore Rs. 19,875 Rate of Return = (NAV at present NAV at purchase) + Dividend x 100 NAV at Purchase (Rs. 19,875 Rs. 15 ) + Rs. 2 x 100 15 = 45.83% 21. Rs. In Lakhs Listed shares at cost (ex-dividend) 20.00 Cash in hand 1.23 Bonds and debentures at cost 4.30 Of the above, bonds and debentures not listed and quoted 1 Other fixed interest securities at cost 4.50 Dividend accrued 0.80 Amount payable on shares 6.32 Expenditure accrued 0.75 Current realizable value of fixed income securities of face value of Rs. 100 each 106.50 Number of units (face value of Rs. 10 each) is Rs. 2,40,000 All listed shares were purchased at a time when index was 1200. On NAV date, the index is ruling at 2,120. Listed bonds and debentures carry a market value of Rs. 5 lakh on NAV date. Ans. Particulars of assets or liablities Adjustments Value in lacs

Equity shares Index (2,120 /1,200) x 20 35.33 Cash in hand Book value 1.23 Bonds and debentures(not Book value 1 listed) Bonds and debentures (listed) Book value 5 Dividend accrued 0.80 Fixed income securities MV ( 106.50/100) x 4.50 4.7925 Total Assets (A) 48.1525 Less: Liabilities Due on shares 6.32 Expensed payable 0.75 Total (B) 7.07 Net Asset Value (A B) 41.0825 Unit under scheme 2.4 lac NAV = 41.0825/2.4 = Rs. 17.12 per unit 22. A mutual fund that had a net asset value of Rs. 10 at the beginning of the month. It made income and capital gain distribution of Rs. 0.05 and Rs. 0.04 per unit respectively during the month and then ended the month with a net asset value of Rs. 10.03. Compute the monthly return. Ans. Return = Dividend +Capital Gain + (NAV 1 NAV 0) NAV 0 = 0.05 + 0.04 +.03 = 0.12 x 100 = 12% 10 10 23. The unit price of the TSS Scheme of a mutual fund is Rs. 10. The public offer price of the unit is Rs. 10.204 and the redemption price is Rs. 9.80. Calculate (i) Front end load (ii) Back end load Ans. Calculation of Front end load Offer Price = NAV 1 Front end load Rs. 10.204 = Rs. 10 (1 Front end load) 1- Front end load = 10/10.204 Front end load =.99 + 1 = 2% (i). Back End Load Charges: We know, Redemption Price = NAV 1 + Back end load Rs. 9.80 = 10

1+ Back end load = 1.02 Back end load = 2.02% 1 + Back end load 24. Calculate profits and losses from the following transactions: (i) Mr. X writes a call option to purchase share at an exercise price of Rs. 60 for a premium of Rs. 12 per share. The share price rises to Rs. 62 by the time the option expires. (ii) Mr. Y buys a put option at an exercise price of Rs. 80 for a premium of Rs. 8.50 per share. The share price falls to Rs. 60 by the time the option expires. (iii) Mr. Z writes a put option at an exercise price of Rs. 80 for a premium of Rs. 11 per share. The price of the share rises to Rs. 96 by the time the option expires. (iv) Mr. XY writes a put option with an exercise price of Rs. 70 for a premium of Rs. 8 per share. The price falls to Rs. 48 by the time the option expires. Ans. (i) For Mr. X: Profit = 60 62 + 12 = Rs. 10 (ii) For Mr. Y: Profit = 80 60 8.50 = Rs. 11.50 (iii) For Mr. Z: Profit = 11 ( Option will not be exercised) (iv) For Mr. XY: (Loss) = - 70 + 48 + 8 ( Rs. 14) Computation of Closing Price of Scrips in the Cash Segment The closing price of scrips is computed by the Exchange on the basis of weighted average price of all trades executed during the last 30 minutes of the continuous trading session. However, if there is no trade recorded during the last 30 minutes, then the last traded price of a scrip in the continuous trading session is taken as the official closing price.

(25) The following information has been collected regarding two shares, Share-A and Share-B, trading at BSE on 18 th September, 2014 : Share-A Date Time Price ( ) No. of shares traded September, 18 th 2014 14:45:10 385.60 550 September, 18 th 2014 14:55:35 382.78 1,575 September, 18 th 2014 15:00:20 380.99 1,514 September, 18 th 2014 15:01:30 381.79 1,625 September, 18 th 2014 15:05:40 380.38 1,025 September, 18 th 2014 15:10:20 381.51 1,390 September, 18 th 2014 15:20:25 381.42 800 September, 18 th 2014 15:22:20 384.07 600 September, 18 th 2014 15:25:55 383.74 1,200 Share-B Date Time Price ( ) No. of shares traded September, 18 th 2014 14:07:30 50.60 250 September, 18 th 2014 14:11:40 52.10 585 September, 18 th 2014 14:16:20 49.85 700 September, 18 th 2014 14:26:25 51.25 425 September, 18 th 2014 14:45:10 50.75 450 September, 18 th 2014 14:55:35 49.95 500 You are required to determine the closing prices and last traded prices for both the shares for 18 th September, 2014. (Dec, 14)( 6 marks)