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AAFM CWM_LEVEL_2 Exam - Topic 4 Question 21 Discussion

Section C (4 Mark)Read the senario and answer to the question.If Saxena's debentures have a balance maturity period of 15 years &the coupons are payable annually, what should be the market valuation of these debentures, if risk free interest rate is taken as the required IRR?
C) Rs. 17,76,980
A) Rs. 10,00,000
B) Rs. 16,38,807
D) Rs. 7,76,980

AAFM CWM_LEVEL_2 Exam - Topic 4 Question 21 Discussion

Actual exam question for AAFM's CWM_LEVEL_2 exam
Question #: 21
Topic #: 4
[All CWM_LEVEL_2 Questions]

Section C (4 Mark)

Read the senario and answer to the question.

If Saxena's debentures have a balance maturity period of 15 years &the coupons are payable annually, what should be the market valuation of these debentures, if risk free interest rate is taken as the required IRR?

Show Suggested Answer Hide Answer
Suggested Answer: C

by Jenelle at May 06, 2022, 12:49 AM

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Sylvia
7 months ago
Wait, Rs. 7,76,980? That seems way too low!
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Fabiola
7 months ago
I think it's definitely option B, looks right to me!
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Novella
7 months ago
The market valuation depends on the coupon rate and IRR.
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Florinda
7 months ago
}
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Boris
7 months ago
]
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Antione
8 months ago
}
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Gertude
8 months ago
"Candidate 4",
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Teddy
8 months ago
{
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Ligia
8 months ago
},
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Rhea
8 months ago
"If the coupon rate equals the IRR, the price should be at par, but I’m not certain this one’s coupon rate matches."
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Gertude
8 months ago
"Candidate 3",
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Melissia
9 months ago
{
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Rhea
9 months ago
"Formula memory: Price = C * [1 - (1+r)^-n] / r + F / (1+r)^n."
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Theola
9 months ago
Just remember, the longer the maturity, the higher the valuation usually!
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Nan
9 months ago
Not so sure about that, could be option C too.
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Raul
10 months ago
},
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Rhea
10 months ago
"I remember a similar practice Q: use r as the risk-free IRR, n = 15 years, F = face value, C = annual coupon."
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Gertude
10 months ago
"Candidate 2",
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Geraldo
10 months ago
{
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Amina
10 months ago
},
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Rhea
10 months ago
"PV pricing rule: value = PV of coupons plus PV of the maturity value, all discounted at the IRR. Not sure if Saxena's is at par or has a premium."
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Gertude
11 months ago
"Candidate 1",
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Fernanda
11 months ago
{
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Joanna
11 months ago
[
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Slyvia
11 months ago
{
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Omer
11 months ago
Hmm, I'm a bit unsure about this one. I'll need to double-check the Spring configuration details to make sure I understand the naming conventions.
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Jeanice
11 months ago
Okay, let me think this through step-by-step. I'll go through each equation and evaluate the logic.
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Kip
11 months ago
Okay, I got this. The question is asking about the specific management representations the auditor should obtain, so I'll carefully evaluate each choice against the requirements stated in the question stem.
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Willodean
12 months ago
Connecting to Cisco ThreatGrid for sandboxing could be essential too, right? I remember practicing a case study similar to this.
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