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CCRA-L2 Sample Questions Answers

Questions 4

Scott is a credit analyst with one of the credit rating agencies in India. He was looking in Oil and Gas Industry companies and has presented brief financials for following 4 entities:

Which of the following statements is incorrect?

Options:

A.

B Ltd has higher EBITDA margins as compared to C Ltd.

B.

D Ltd has higher EBITDA margins as competed to B Ltd.

C.

C Ltd has worst total debt to EBITDA ratio.

D.

B Ltd has worst interest coverage ratio.

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Questions 5

Statement 1: The Yields on the MBS PTCs are normally higher than the yields on the corporate bonds of similar ratings.

Statement 2: The reason for difference in yields on the corporate bonds and similarly rated PTCs is on account of the optionality in the PTC, the unfamiliarity of the structure and uncertainties in respect of legal and structural issues.

Which of the above statements is correct?

Options:

A.

None of the statements

B.

Both the statements

C.

Only Statement 2 is correct

D.

Only Statement 1 is correct

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Questions 6

Change in priority ranking of reference obligations is:

Options:

A.

Obligation acceleration

B.

Obligation default

C.

Restructuring

D.

Repudiation

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Questions 7

Mr. A shares details of two bonds as follows:

Determine the interpolated spread for Bond X and Bond Y?

Options:

A.

Bond X: 80 bps

Bond Y: Negative

B.

Bond X: 35 bps

Bond Y: 5 bps

C.

Bond X: 65 bps

Bond Y: Nil

D.

Bond X: 20 bps

Bond Y: 20 bps

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Questions 8

The most important metric for a bank is the Net Interest Income (NII) which is the difference

between____income and____expense.

Options:

A.

Interest; Total

B.

Interest; Fee

C.

Interest; Interest

D.

Total; Total

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Questions 9

Step up upon feature will lead to

Options:

A.

no change as step is not linked to issuers rating

B.

positive basis because the bond holder is compensated

C.

negative basis given that the bondholder is not compensated

D.

Will lead to a change only if there is a linkage to the issuer’s rating

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Questions 10

Following is information related banks:

Auckland Ltd is a public sector bank operating with about 120 branches across India. The bank has been in business since 1971 and has about 40% branches in rural areas and about 75% of all branches are in

Western India. On the basis of the size, Auckland Ltd will be ranked at number 31 amongst 40 banks in India.

Although top management has appointment period of 5 years, generally they retire on ach sieving age of 60 years with an average tenure of only 2 years at the top job.

Profit and Loss Account

Balance Sheet

The rating wise break-up of assets for FY11 is as follows:

The core spreads for FY13 as compared to FY12 have:

Options:

A.

Expanded by 136 bps

B.

Contracted by 327 bps

C.

Contracted by 136 bps

D.

Expanded by 191 bps

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Questions 11

Two economies HardLand and SincereLand have provided following information with respect to their economies in USD Billion:

Based on the above information which entity is better in terms of current account deficit %?

Options:

A.

Sincereland by 583 bps

B.

Hardland by 56 bps

C.

Sincereland by 56 bps

D.

Hardland by 583 bps

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Questions 12

“Following four entities operate in the Indian IT and BPO space. They all are into same segment of providing off-shore analytical services. They all operate on the labour cost-arbitrage in India and the countries of their clients. Following information pertains for the year ended March 31, 2013.

The year FY13, was typically a good year for Indian IT companies. For FY14, the economic analysts have given following predictions about the IT Industry:

A) It is expected that INR will appreciate sharply against other USD.

B) Given high inflation and attrition in IT Industry in India, the wages of IT sector employees will increase more sharply than Inflation and general wage rise in country.

C) US Congress will be passing a bill which restricts the outsourcing to third world countries like India.While analyzing the four entities, you come across following findings related to Glowing:

Glowing is promoted by Mr.M R Bhutta, who has earlier promoted two other business ventures, He started with ABC Entertainment Ltd in 1996 and was promoter and MD of the company. ABC was a listed entity and its share price had sharp movements at the time of stock market scam in late 1990s. In 1999, Mr.Bhutta sold his entire stake and resigned from the post of MD. The stock price declined by about 90% in coming days and has never recovered. Later on in 2003, Mr.Bhutta again promoted a new business, Klear Publications Ltd (KCL) an in the business of magazine publication. The entity had come out with a successful IPO and raised money from public. Thereafter it ran into troubles and reported losses. In 2009, Mr.Bhutta went on to exit this business as well by selling stake to other promoter(s). There have been reports in both instances with allegations that promoters have siphoned off money from listed entities to other group entities, however, nothing has been proved in any court.”

Based solely on Total Debt to EBITDA and Interest Coverage, which of the four entities is best amongst the four respectively:

Options:

A.

Glamorous and Glamorous

B.

Glamorous and Glowing

C.

Glowing and Beautiful

D.

Glamorous and Glamorous

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Exam Code: CCRA-L2
Exam Name: Certified Credit Research Analyst Level 2
Last Update: May 2, 2024
Questions: 84
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