Date: 30/07/2020

ASSIGNMENT – I
of
SAPM

Submitted By-
Raj Kumar Yadav
Roll no. 19202315
Section. B

Submitted To-
Prof. Saroj Routray
Assignment Questions: Refer the above table and answer the following questions.
1. Why SRTRANSFIN(Regular) is selling(LTP) at lower than Face value, whereas
SBIN(regular) is selling at higher than the Face value. Write the probable
reasons.
Answer: SRTRANSFIN(Regular) is Selling (LTP) at lower than Face Value, whereas
SBIN(Regular) is selling (LTP) at higher than the Face value because of the given reason:
I) As the credit rating of the SRTRANSFIN is lower than the SBIN as SRTRANSFIN
has only AA+ whereas SBIN has AAA/Stable.
II) SRTRANSFIN maturity date is 12th July 2021 which means if someone will buy at
higher rate then he/she will not earn the desired return instead may have incur loss
because the maturity date is very near to mature whereas the maturity date of SBIN
bond is more i.e. 16th march 2026, so the investors may earn more return than the
desired so that it is trading in higher prices.
III) The coupon rate of SRTRANSFIN is lower than the SBIN as it is also one of the
reason of trading lower than the face value of SRTRANSFIN bond.
IV) As the world is suffering from the Pandemic COVID-19, the whole economy of the
world is down and the SRTRANSFIN is financing company, if the world economy
is down the company does not want to invest in the market because the company
may incur loss. So that the investors are not more interested to invest in the bond of
SRTRANSFIN whereas the SBIN is backed by the government so even if the SBI
incur loss there is government to pay of the loss. So the investors are more interested
to invest in the bond of the SBI.
V) Demand of the bond of SBI is more than the demand of Shriram Transport Finance
Company in the market.
 2. NHAI has two bonds series (i) NA and (ii) N2, both are tax free. Although there
is a good difference in the Coupon rate but both the bonds are sold(LTP) almost
at equal prices. What are the reasons?
Answer: The reasons for the above conditions are as given below:
I) The N2 series of bond has the higher coupon rate but it has earlier maturity date i.e.
25th Jan 2027 than the NA series of bond which has maturity date is later i.e. 11th Jan
2031.
II) The current yield of both the series is same i.e. 6% which means that the both bond is
giving same amount of cash flow from the investment.

3. What do you mean by bond type (i) Regular and (ii) tax-free?
Answer: Regular Bond type is the type of bond on which the bond holder gets the regular
payment of the interest till the maturity period and on the date of maturity, the bond holder
will get the face value of the bond. It is also known as Coupon Bond.
Tax free bond is a type of bond which has a fixed rate of interest which is issued for a fixed
period. Interest earned from a tax-free bond is exempt from tax. As there is income slab but
in this case the interest earned from this type of bond is tax free.

4. Why HUDCO (NE series) is sold(LTP) at such a high price. Give your reasons.
Answer: HUDCO (NE series) is sold(LTP) at such a high price because HUDCO (NE
Series) is tax free bond with high rate of interest i.e. 9.01% and also the maturity date is very
long i.e. 13th Jan 2034. So the holders of this bond will get more return as well as tax
exemption on the interest earned on this type of bond which will increase the cash flow in the
portfolio.

5. Write the basic features of bonds.

Answer: The basic features of the bonds are as given below:
I) Par Value or Face Value: It is the value of the bond on which it is issued by the
company which promises to pay amount to the holder of the bond at the date of maturity.
II) Coupon Rate: It is the fixed rate of interest which the bondholder gets from the issuer
company of the bond.
III) Maturity Date: It is the date on which the bond expired and the principal amount is paid
to bondholder by the country.
IV) Redemption Value: It is the value paid to the bondholder, at the time of expiry of the
term for which bond is issued.