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MGT411 - Money & Banking

Graded Discussion Board

Dec 5-10, 2013

Total Marks 30





Money & Banking students will be enabled to understand:


  • What are the different sources of bond risk and their impact on bonds’ value?


  • The behavior and strategy of an investor (bondholder), to manage & deal with the risk of a bond according his needs and market conditions.



Luxurious life, who does not wish to live. Nowadays, a good education is essential for such a wishful life. Getting quality education has become a dream that can hardly come true for lower middle class which strives tooth and nail. They put their lives and even their hard earned savings at risk to secure better future for themselves and their coming generations.

Mr. Amjad recently completed his graduation from a local university and now plans to pursue higher studies abroad, Australia. Getting admission and   study visa may take thirteen to fifteen months. He has sufficient money that can only help him secure admission, get visa and travel to desired location but cannot pay for accommodation, food and other expenses; therefore requires more money. An idea knocked him to invest the money in hand in some corporate bonds that may earn him high profits(which he actually needs); would sell these bonds without any loss upon the confirmation of admission to pay dues (admission charges, semester charges, travel, boarding and messing) and start working for making his dreams come true.


1.      Suppose Mr. Amjad invests money in 12% corporate bonds, after a month, government changes its policy regarding interest rate. How can Mr. Amjad incur loss due to such change?                                                   

2.      Does the above change (in part 1) link with the liquidity of a bond? Support your answer with logical reasoning.                                          

3.      After two months, a banker approaches Mr. Amjad and attempts to convince him to move his money from bonds and invest in bank’s “Mahana Certificates (MCs)”, he claims that MCs are 100% secure and fully insured by the government. How would Mr. Amjad respond?                          


Note: Complete your comment within 250 words

Important Instructions:


1.   Your discussion must be based on logical facts.

2.   The discussion board will remain open for 4 working days.

3.   Do not copy or exchange your answer with other students.  Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.

4.   Obnoxious or ignoble answer should be strictly avoided.

5.   Questions / queries related to the content of the discussion board, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of discussion board is over.

v  For detailed instructions please see the discussion board announcement


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Replies to This Discussion

tu ab kia kary?????

fatima third ka ans to yehi bnay ga k usy accept kar leni chahye offer... 1st ka ans mujhe lagta hai k usy loss is trha ho ga k government bond yield ki waja se IR man changes aen gi jeski waja se loss ho ga or usy bond ko sell karne man problem ho gi ...kya khayal hai???

Here is my solution.

1) Like other bonds the corporate bonds tend to fall in value when interest rate rise. Now if Govt rise the interest rate then the value of bond is lower now because Mr.Amjad could not hold a bond till maturiy so he will be effected by this change and face a loss in resale process.

2) Above change is linked with the liquidity of a bond because when interest rate rise new bond issues will come to market with low yields than older securities making the older ones worth less so by above change the bond is less liquid.
3) Mr.Amjad should repond positively to the offer of banker because he cannot afford more loss so he should have purchase the MCs which are backed by the Govt. and more secure than the bonds.
plz dont copy paste jst take it as idea i am not 100% sure about this

Bond alag cheez ha MCs alag cheez ha ap 2no ko mix na kare. phle ka ans ye ha k usko loss hoga agr govt interest rate increase kre ge. last me us ne pocha ha k kya ose MCs mei invest krna chaiye ya ni to agr bonds mei loss ho rha ha or MCs secure  investment ha to use bond resale kr k MCs mei invest krna chaiye. thats what i think....

Asalam o alikum,

I have already done my GDB, haroon bhai ap near to answer hain baki sub goooooom rahay hain, in se kaho agar itna hi goomna hain to funland se ho ayen

Haha Asad shb ye log jis trha se ghoom rhe hei inko funland ni changa manga k junglo me jna chaiye.......

plz koi tu btao

bheno aur bhaio jo ata ha Allah ka name lay kar post kar do time bohat kam ha kahi asa na ho wapda waly hum per meharban ho jaye aur lite chali jaye ya VULMS busy ho jye

acha acha bolain mansoor sab 

acha acha he bol raha ho mujhay to jasy be ata tha gdb Allah ka name lay kar post kar dia dakha jye ga jo be ho ga

Ans: As per needs of Amjad(admission charges, semester charges, travel, boarding and messing), he will never go in loss as Govt. policy is atleast not gonna reduce the i rate to -ve so atleast he will get principle amount which is already enough to pay his basic needs(admission, get visa and travel to desired location whic are actually same:admission charges, semester charges, travel, boarding and messing. So i think 1st Q. is trick Q.


tum logo ka bus nahi chal raha warna computer ki lcd toor k sub ak sath mil kar gdb solve kro hahahahahah


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