FINC 3014: Investment Analysis and Portfolio Management

Problem Set 1
Aditya Banerjee
SOB, UPES

1. Find the cut-off issue price for a 182 days treasury bill from the auction data given below:
Auction size: ₹4,000 crores. Par Value is ₹100 per unit. Minimum bid: ₹10,000.
Bid Bid Amount
Bidders
Price ₹ in ₹ Crores
1 97 220
2 97.15 245
3 97.3 250
4 98 280
5 96.9 500
6 98.25 545
7 96.75 550
8 98.15 800
9 97.55 900
10 97.75 980

Find the total amount collected at uniform price bid and multiple price bid.
(Hint: Arrange the bids by their prices in descending order. ₹3,886 Crore; ₹3,912.23
Crore)
2. From the previous question, find the yield at which the T-bill is issued (5.88% p.a.)

3. A 91 days T-bill was issued at a yield of 6.15% p.a., after 41 days the yield is 5.65% p.a..
What was the issue price? What is the price after 41 days? Face value is ₹100. (Issue price
was: ₹98.49; Calculate the price after 41 days yourself.)

4. You purchased a corporate bond at ₹98.55 and it pays a coupon of 8% p.a. annually, what
is the current yield? (face value is ₹100) (8.12% p.a.)

5. Determine the price of a 7.8% p.a. coupon semi-annual 3-year bond. Assume that the
current YTM is 5.5%. Par value of the bond is ₹1000. Do not use excel sheet for this
problem. (₹1,062.82)

6. Explain the relationship between price and yield-to-maturity (YTM) of a bond with
examples and graphs.

7. An 8.8% coupon (annual) 5-year bond is trading at ₹108.78. The bond’s face value is ₹100.
What is the current YTM? (Hint: Use 6% and 7% as reference rates. Do not use excel for
this problem)