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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?

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Suggested Answer: C

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

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Sylvia
2 months ago
Wait, Rs. 7,76,980? That seems way too low!
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Fabiola
2 months ago
I think it's definitely option B, looks right to me!
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Novella
2 months ago
The market valuation depends on the coupon rate and IRR.
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Florinda
3 months ago
}
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Boris
3 months ago
]
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Antione
3 months ago
}
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Gertude
3 months ago
"Candidate 4",
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Teddy
3 months ago
{
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Ligia
4 months ago
},
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Rhea
4 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
4 months ago
"Candidate 3",
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Melissia
4 months ago
{
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Rhea
4 months ago
"Formula memory: Price = C * [1 - (1+r)^-n] / r + F / (1+r)^n."
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Theola
5 months ago
Just remember, the longer the maturity, the higher the valuation usually!
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Nan
5 months ago
Not so sure about that, could be option C too.
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Raul
5 months ago
},
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Rhea
5 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
5 months ago
"Candidate 2",
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Geraldo
6 months ago
{
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Amina
6 months ago
},
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Rhea
6 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
6 months ago
"Candidate 1",
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Fernanda
6 months ago
{
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Joanna
6 months ago
[
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Slyvia
7 months ago
{
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Omer
7 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
7 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
7 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
7 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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