AIWMI CCRA-L2 Exam - Topic 5 Question 107 Discussion

Actual exam question for AIWMI's CCRA-L2 exam

Question #: 107
Topic #: 5

The following information pertains to bonds:

Further following information is available about a particular bond 'Bond F'

There is a 10.25% risky bond with a maturity of 2.25% year(s) its current price is INR105.31, which ccorresponds to YTM of 9.22%. The following are the benchmark YTMs.

Assume that the general market rates have increased. An issuer, Revolution Ltd has plans to roll over its existing commercial paper and forth coming reset dates for its floating rate bonds are very near. Which of the following ratios for revolution will get impacted?

AInterest Coverage and Return on assets

BDSCR, and Return on Assets

CDSCR, Interest Coverage and Return on assets

DDSCR and interest Coverage

Show Suggested Answer

Suggested Answer: B

by Della at Feb 11, 2025, 05:30 PM

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Leonida

7 months ago

Not sure if all those ratios will be affected, seems like a stretch.

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Cherri

7 months ago

Totally agree, interest coverage will definitely be impacted!

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Becky

7 months ago

Wait, how does an increase in rates affect DSCR?

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Justine

7 months ago

I think option C makes the most sense here.

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Malcolm

8 months ago

Bond F has a YTM of 9.22%.

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Rocco

8 months ago

I lean towards option C because if market rates rise, it would affect all those ratios, but I’m not 100% confident about the Return on Assets part.

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Jenelle

8 months ago

This question reminds me of a practice problem where we analyzed similar ratios. I feel like both DSCR and Interest Coverage would be affected, but I can't recall if Return on Assets is also included.

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Carmelina

8 months ago

I think the DSCR is definitely going to be impacted since it relates to cash flow and debt obligations, but I'm a bit confused about the Interest Coverage ratio.

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Hobert

8 months ago

I remember studying how interest rates affect bond prices and the impact on financial ratios, but I'm not entirely sure which ratios are most relevant here.

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Kina

8 months ago

This looks like a straightforward application of bond pricing and financial ratio analysis. I feel confident I can work through this step-by-step and arrive at the correct answer.

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Rory

8 months ago

Hmm, I'm a bit confused by all the financial terminology in this question. But I'll give it my best shot. I'll need to really focus on understanding how the bond information and market rate changes relate to the ratios mentioned.

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Letha

8 months ago

Alright, time to put on my thinking cap. The key details here are the bond information, the benchmark YTMs, and the fact that market rates have increased. I'll need to analyze how that would affect Revolution Ltd.'s financials.

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Tamesha

8 months ago

Okay, let's see. The question is asking which ratios will be impacted for Revolution Ltd. based on the information provided about Bond F and the general market rate increase. I think I can work through this step-by-step.

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Leonida

8 months ago

Hmm, this looks like a tricky one. I'll need to carefully review the information about the bond and the benchmark YTMs to figure out how the general market rate increase will impact the ratios for Revolution Ltd.

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Howard

1 year ago

I wonder if they'll let me answer this question in interpretive dance. I bet I could really capture the essence of bonds and financial ratios that way.

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Tonette

1 year ago

Bonds, bonds, bonds... sometimes I feel like they're the only thing we ever talk about in these exams. But hey, I guess they're important, right? Let's see what we can do here.

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Buddy

1 year ago

Wow, this is a juicy question! Floating rate bonds, commercial paper, and financial ratios all in one? Bring it on, I'm ready to crunch some numbers and show off my finance chops.

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Claudio

1 year ago

Ah, good old bonds. I remember when I used to collect them as a kid. Simpler times, huh? Anyway, let's see... DSCR, interest coverage, and return on assets, you say? Sounds like I'll need to brush up on my financial ratio knowledge for this one.

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Jolene

11 months ago

Audrie: That makes sense. It's always good to stay updated on financial ratios.

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Margarita

11 months ago

User 3: I think the ratios that will get impacted for Revolution Ltd are DSCR, interest coverage, and return on assets.

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Audrie

11 months ago

User 2: Yeah, I remember learning about DSCR and interest coverage in finance class.

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Nina

12 months ago

User 1: Bonds can be tricky, but they're important to understand.

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Scarlet

1 year ago

Hmm, this is a tricky one. The bond information seems straightforward, but the part about the impact on Revolution Ltd's ratios is a bit more complex. I'm going to have to think this through carefully.

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Laura

12 months ago

C) DSCR, Interest Coverage and Return on assets

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Franchesca

12 months ago

B) DSCR, and Return on Assets

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Troy

12 months ago

A) Interest Coverage and Return on assets

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Ronnie

1 year ago

I'm not sure, but I think D) DSCR and Interest Coverage could also be impacted due to the increase in market rates.

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Timothy

1 year ago

I agree with Gail, because if market rates have increased, it will impact the Debt Service Coverage Ratio (DSCR), Interest Coverage, and Return on Assets.

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Gail

1 year ago

I think the correct answer is C) DSCR, Interest Coverage and Return on assets.

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