Skip to content

NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to the Indian Financial Markets

Ms. Kavita Rao, a 35-year-old client of an investment adviser, has Rs 2,00,000 to place for 91 days. She is considering a 91-day Treasury bill with a face value of Rs 100 purchased at Rs 98.50. Ignoring day-count refinements and compounding, what is the approximate annualised yield on the purchase price using a 365-day year?

The annualised yield is about 6.11%. The gain of Rs 1.50 on a purchase price of Rs 98.50 is 1.5228% over 91 days, and multiplying by 365/91 gives roughly 6.11% per year. Using face value as the base would understate the yield.

  1. A6.11%Correct
  2. B1.52%
  3. C6.09%
  4. D6.00%

Explanation

Discount is 100 - 98.50 = 1.50. Return for the period = 1.50/98.50 = 1.5228%. Annualising: 1.5228% x 365/91 = 6.108%, about 6.11%. Using the 1.50/100 base gives 6.02%, which is wrong; 1.52% is the unannualised figure.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to the Indian Financial Markets shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to the Indian Financial MarketsFree diagnostic mock

More Introduction to the Indian Financial Markets questions