ANNEX - 1

Dear Respondent

I have been writing thesis on Importance and Prospects of Bond Market Growth in Nepal in
partial fulfillment of the requirements of Masters of Business Studies (MBS). I have some
questions regarding bonds market hoping your timely response. Your cooperation has great value
for me.

Thanking you,

Researcher, Kailali Multiple Campus

Instructions: please tick () in an appropriate place and put your view in open end question.

1. Do you think existing legal provisions regarding debt securities market is:
a. Sufficient ( )
b. Insufficient ( )

2. Are there problems in primary and secondary market of bonds?

a. Yes ( )
b. No ( )

3. In which sector of debenture would you like to invest?

a. Banks ( )
b. Manufacturing ( )
c. Hotel ( )
d. Other ( )

4. Which is most dominant prospect of debenture issue?

a. Additional Capacity Supply ( )
b. Tax advantage ( )

5. Which security issue do you prefer most?

a. Debenture ( )
b. Common Stock ( )
c. Preference share ( )
d. Mutual Fund ( )

6. Why you prefer to bank loan instead of issuing debenture?

a. Bank loan is easily available ( )
b. Issuing debenture is difficult process ( )
c. Cost of bank loan is less than issuance debenture ( )
d. Other ( )

7. Is stock issue easier than debenture issue?

 a. Yes ( )
b. No ( )

8. What is the reason that influences you to purchase debenture?

a. Liquid assets ( )
b. Lack of investment opportunity ( )
c. Declining interest rate of deposit ( )
d. Others ( )

9. Which factor dominates the growth of Nepalese bonds market?

a. lack of investors awareness ( )
b. Limited supply of quality bonds ( )
c. Lack of capital gain opportunity ( )

10. Which type of bond do you prefer?

a. Government Bonds ( )
b. Corporate Bonds ( )
 ANNEX - 2

Tabulation of Responses to Field Survey Based on Questionnaire

S.N Listed Broker & Individual Other Total

Companies Market Investors Expert
Maker
1 8 2 10 6 26
a
b 27 13 20 14 74
35 15 30 20 100
2 33 12 28 19 92
a
b 3 3 2 1 8
35 15 30 20 100
3 21 9 15 14 59
a
b 3 3 4 2 12
c 5 2 6 2 15
d 6 1 5 2 14
35 15 30 20 100
4 28 8 16 7 59
a
b 7 7 14 13 41
35 15 30 20 100
5 10 5 8 6 29
a
b 20 7 16 8 51
c 3 2 4 1 10
d 2 1 2 5 10
35 15 30 20 100
6 13 5 10 7 35
a
b 7 6 8 5 26
c 12 3 10 5 30
d 3 1 2 3 9
35 15 30 20 100
7 25 8 22 7 62
a
b 10 7 8 13 38
35 15 30 20 100
 8 12 8 11 10 41
a
b 8 4 9 5 26
c 10 1 8 3 22
d 5 2 2 2 11
35 15 30 20 100
9 14 7 10 8 39
a
b 11 5 11 8 35
c 10 3 9 4 26
35 15 30 20 100
10 15 8 21 12 56
a
b 20 7 9 8 44
35 15 30 20 100
Source: Field Survey
 Annex-3

Growth Trend of Government Debt Securities Fitted in Curvilinear Model (In Million)

X= Y=
(year- Amount of
Yea 1986/87 govt.
r ) Securities xy x2 x3 x4 x2y

1987 1 8,997 8,997 1 1 1 8,997

1988 2 11,363 22,726 4 8 16 45,452

1989 3 12,888 38,664 9 27 81 115,992

1990 4 14,673 58,692 16 64 256 234,768

1991 5 20,856 104,280 25 125 625 521,400

1992 6 23,235 139,410 36 216 1296 836,460

1993 7 25,456 178,192 49 343 2401 1,247,344

1994 8 30,631 245,048 64 512 4096 1,960,384

1995 9 32,058 288,522 81 729 6561 2,596,698

1996 10 32,242 322,420 100 1000 10000 3,224,200

1997 11 35,891 394,801 121 1331 14641 4,342,811

1998 12 38,407 460,884 144 1728 20736 5,530,608

1999 13 49,670 645,710 169 2197 28561 8,394,230

2000 14 54,357 760,998 196 2744 38416 10,653,972

2001 15 60,044 900,660 225 3375 50625 13,509,900

2002 16 73,621 1,177,936 256 4096 65536 18,846,976

 2003 17 81,148 1,379,516 289 4913 83521 23,451,772

2004 18 86,134 1,550,412 324 5832 104976 27,907,416

2005 19 87,564 1,663,716 361 6859 130321 31,610,604

2006 20 89955 1,799,100 400 8000 160000 35,982,000

2007 21 99,304 2,085,384 441 9261 194481 43,793,064

2008 22 111,239 2,447,258 484 10648 234256 53,839,676

2009 23 120,874 2,780,095 529 12167 279841 63,942,187

2010 24 142,860 3,428,633 576 13824 331776 82,287,187

2011 25 179,328 4,483,210 625 15625 390625 112,080,250

2012 26 209,120 5,437,125 676 17576 456976 141,365,255

x2 x3 x4 x2y
Tota X=23 y=1,731,91 xy=32,802,3 =6,20 =123,20 =2,610,62 =688,329,60
l 1 5 89 1 1 1 4

N=26

The equation of curvilinear model is as below

Y= a+bx+cx21

y= Na + b x+c x2&&&&&&&&2

Xy= a x + b x2+cx3&&&&&&&.3

X2y= ax2+bx3+cx4&&&&&&.4

Where,

y=1,731,915

X=231

x2 =6,201

xy=32,802,389
 x3 =123,201

x2y =688,329,604

x4 =2,610,621

Substituting the value in equation 2,3 and 4 equations we got,

1,731,915=26a+231b+6,201c.5

32,802,389=231a+6,201b+123,201c6

688,329,604=6,201a+123,201b+2,610,621c..7

Solving equation 5 and 6, multiplying 5 by 231 and equation by 26,

we get

6006a+53361b+1432431c = 400072365

6006a+161226b+3203226c = 852862114

- - -

-107865b-1770759c = -452789749

Taking (-) as common, so we get

107865b+1770759c = 4527897498

Solving equation 6 and 7, multiplying equation 6 by 6201 and equation 7 by 231

we get

1432431a+38452401b+763969401c = 203407614189

1432431a +28459431b+603053451c = 159004138524

- - -

999270b+160915950c = 44403475665.9

Solving equation 8 and 9, multiplying equation 8 by 9992970 and equation 9 by 107865,

we get
1077891703050b+176951475600120c=4524714378064530

1077891703050b+17357198946750c=4789580902605220

- - -

159594276653370c= -264866504540690

c = -264866504540690/159594276653370

c = -1.66

Now, substituting the value of c in equation (8), we get

107865b+1770759c=452789749..8

107865b+1770759*-1.66= 452789749

107865b =952907438+2939459.94

b = 455729208.90/107865

b = 4224.99

Now, putting the value of b in equation (5), we get

1731915=26a+23b+6201c.5

26a+231*4224.99+6201*-1.66 = 1731915

a = 766235.97/26

a = 29470.61

Therefore the value of a = 29470.61

b = 4224.99

c = -1.66

Now, substituting the value of a, b and c in the equation (1), the curvilinear model will be,

y = 29470.61+4224.99x-1.66x2

Forecast of total bonds

The above equation is to forecast the amount of government bonds and T-Bills for the year,
2013, 2014, 2015, 2016 and 2017. Here the amount of securities issued by government has been
estimated below using curvilinear model.

For,

Year 2013, x = 23

Year 2014, x = 24

Year 2015, x = 25

Year 2016, x = 26

Year 2017, x = 27

The forecasted amount of government securities issued for 2013:

= 29470.61+4224.99x-1.66x2

=29470.61+ 4224.99*23-1.66*529

= Rs. 125767.24 (In Million)

The forecasted amount of government securities issued for 2014:

= 29470.61+4224.99x-1.66x2

=29470.61+ 4224.99*24-1.66*576

= Rs. 129914.21 (In Million)

The forecasted amount of government securities issued for 2015:

= 29470.61+4224.99x-1.66x2

==29470.61+ 4224.99*25-1.66*625

= Rs. 134057.86 (In Million)

The forecasted amount of government securities issued for 2016:

= 29470.61+4224.99x-1.66x2

=29470.61+ 4224.99*26-1.66*676

= Rs.138198.19 (In Million)

The forecasted amount of government securities issued for 2017:

= 29470.61+4224.99x-1.66x2

=29470.61+ 4224.27*24-1.66*729

= Rs. 142335.2 (In Million)

 ANNEX - 4

Tet of hyposthesis

Hyothesis 1

In 100 random samples of respondents it, contains the following distribution, which was noted
the basis of related fields. The test is t draw the factors due to which Nepalese bond market
cannot smoothly.

Table 15

Hypothesis Test Regarding Factor Dominating the Growth of Nepal Bonds Market.

Listed Broker Individual Other Experts Total

Companies Market Investors
Makers
Lack of 14 7 10 8 39
investors
awareness
Limited 11 5 11 8 35
supply of
quality bonds
Lack of 10 3 9 4 26
capital gain
opportunity
Total 35 15 30 20 100
Source: Field Survey conducted by researcher

Hyothesis Testing :

Null Hypothesis (H0): There is significant relationship between observed and expected opinion
regarding the drawbacks of band market of Nepal.

Alternative Hypothesis (H1): There is significant relationship between observed and expected
opinion regarding the drawbacks of bond market of Nepal.
Test Statistic: under H0, the test statistics is 2 = (0-E)/E

Calculation of expected frequencies

Expected frequency of R1C1 = Row Total * Column Total/ Grand Total

R1C1 13.65 R3C1 10.5

R1C2 5.85 R3C2 7
R1C3 11.7 R3C3 9.1
R1C4 7.8 R3C4 3.9
R2C1 12.25 R4C1 7.8
R2C2 5.25 R4C2 5.2

Calculation of 2

Observed Expected (O-E) (O-E)2 (O-E)2/E

Frequency (O) Frequency (E)
14 13.65 0.35 0.1225 0.008974
7 5.85 1.15 1.3225 0.226068
10 11.7 -1.7 2.89 0.247009
8 7.8 0.2 0.04 0.005128
11 12.25 -1.25 1.5625 0.127551
5 5.25 -0.25 0.0625 0.011905
11 10.5 0.5 0.25 0.02381
8 7 1 1 0.142857
10 9.1 0 0 0
3 13 3. 13
9 13 7.8 13 0 0 0
4 5.2
0.793302

Hence, 2 tabulated at 5% level of significant for (R-1) (C-1)-2

i.e. (3-1) (4-1)-2

i.e. 4 d.f is 9.49

Interpretation: As per table no. 15, it can be clearly seen that the calculated value of x2 at 5%
level of significance for d5 d.f is 0.793302 and tabulated value of x2 is 9.49. Since tabulated
value of x2 at 5% level of significance for 4 d.f is greater than the calculated value (i.e.
9.49>0.793302), null hypothesis is accepted i.e. there is no significant relationship between
observed and expected opinion regarding the drawback of bond market of Nepal.
Hypothesis 2

In 100 random smaples of respondent it, contains the following distribution, which was noted the
basis of related fields. The test is to draw the choice of securities by Nepalese investors.

Table 16

Hypothesis Test Regarding Choice of Securities

Listed Broker Market Individual Other

Companies Makers Investors Experts Total

Debenture 10 5 8 6 29

Common Stock 20 7 16 8 51

Preference 3 2 4 1 10

Mutual fund 2 1 2 5 10

Total 35 15 30 20 100

Source: Field Survey conducted by researcher

Hypothesis Testing:

Null Hypothesis (Ho): There is no significant relationship between observed and expected
opinion regarding the choice of securities by Nepalese investors.

Alternative Hypothesis (H1): There is significant relationship between observed and expected
opinion regarding the choice of securities by Nepalese investors.

Test Statistic: under H0, the test statistics is 2 = (0-E)/E

Calculation of expected frequencies

Expected frequency of R1C1 = Row Total * Column Total/ Grand Total

 R1C1 10.15 R3C1 3.5
R1C2 4.35 R3C2 1.5
R1C3 8.7 R3C3 3
R1C4 5.8 R3C4 2
R2C1 17.85 R4C1 3.5
R2C2 7.65 R4C2 1.5
R2C3 15.3 R4C3 3
R2C4 10.2 R4C4 2

Calculation of 2

Observed Expected (O-E) (O-E)2 (O-E)2/E

Frequency (O) Frequency (E)
10 10.15 -0.15 0.0225 0.002217
5 4.35 0.65 0.4225 0.097126
8 8.7 -0.7 0.49 0.056322
6 5.8 0.2 0.04 0.006897
20 17.85 2.15 4.6225 0.258964
7 7.65 -0.65 0.4225 0.055229
16 15.3 0.7 0.49 0.032026
8 10.2 -2.7 7.29 0.714706
3 3.5 10 0 0
2 1.5
4 3
1 2
2 3.5
1 1.5
2 3
5 2
0.98329

Hence, 2 tabulated at 5% level of significant for (R-1) (C-1)-7

i.e. (4-1) (4-1) 7

i.e. 2 d.f. is 5.99

Interpretation: As per table 16, it can be clearly seen that the calculated value of 2 at 5% level
of significance for 2 d.f. is 0.98329 and tabulated value of 2 is 5.99: Since tabulated value of 2
at 5% level of significance for 2 d.f. is greater than the calculated value ( i.e. 5.99>0.98329) , the
null hypothesis is accepted i.e. there is no significant relationship between observed and
expected opinion regarding the choice of securities by Nepalese investors.

Hypothesis 3

In 100 random samples of respondents it, contains the following distribution, which was noted
the basis of related fields. The test is to draw the choice of various sectors bonds

Table 17

Survey Results on Regarding to Choice of Various Sectors' Bonds

Listed Broker Market Individual Other

Total
Companies Makers Investors Experts

Banking 21 9 15 14 59

Manufacturing 3 3 4 2 12

Hotel Sector 5 2 6 2 15

Others 6 1 5 2 14

Total 35 15 30 20 100

Source: Field Survey conducted by researcher

Hypothesis Testing:

Null Hypothesis (Ho): There is no significant relationship between observed and expected
opinion regarding the choice of various sectors bond.

Alternative Hypothesis (H1): There is significant relationship between observed and expected
opinion regarding the choice of various sectors bond.
Test Statistic: under H0, the test statistics is 2 = (0-E)/E

Calculation of expected frequencies

Expected frequency of R1C1 = Row Total * Column Total/ Grand Total

R1C1 20.65 R3C1 2.4

R1C2 8.85 R3C2 5.25
R1C3 17.7 R3C3 2.25
R1C4 11.8 R3C4 4.5
R2C1 4.2 R4C1 3
R2C2 1.8 R4C2 4.9
R2C3 3.6 R4C3 2.1

Calculation of 2

Observed Expected Frequency (O-E) (O-E)2 (O-E)2/E

Frequency (O) (E)
21 20.65 0.35 0.1225 0.005932
9 8.85 0.15 0.225 0.002542
15 17.7 -2.7 7.29 0.411864
14 26 11.8 23.8 2.2 4.84 0.203361
3 4.2
3 1.8
4 3.6
2 2.4
5 29 5.25 29 0 0
2 2.25
6 4.5
2 3
6 4.5
1 2.1
5 4.2
2 2.8
0.6237

Hence, 2 tabulated at 5% level of significant for (R-1) (C-1)-8

i.e. (4-1) (4-1) - 8

i.e. 1 d.f is 3.84

Interpretation: As per table 17, it can be clearly seen that the calculated value of 2 at 5% level
of significance for 1 d.f. is 0.6237 and tabulated value of 2 is 3.84. Since tabulated value of 2
at 5% level of significance for 1 d.f. is greater than the calculated value ( i.e. 3.84> 0.6237) , the
null hypothesis is accepted i.e. there is no significant relationship between observed and
expected opinion regarding the choice of various sector's bond.

Hypothesis 4

In 100 random samples of respondents it, contains the following distribution, which was noted
the basis of related fields. The test is to draw the reasons that the investors are influenced to
purchase debt securities.

Table - 18

Survey Results on Regarding to the Reason for Influencing to Purchase Debt Securities

Broker
Listed Individual Other
Market Total
Companies Investors Experts
Makers

Liquid Assets 12 8 11 10 41

Lack of investment
opportunity 8 4 9 5 26

Declining interest
rate of deposit 10 1 8 3 22

Other 5 2 2 2 11

Total 35 15 30 20 100

Source: Field Survey conducted by researcher

Hypothesis Testing:
Null Hypothesis (Ho): There is no significant relationship between observed and expected
opinion regarding the reasons influencing to investors for purchasing debt securities.

Test Statistics: Under H0, the test statistics is 2 = (0-E)2/E

Calculation of expected frequencies

Expected frequency of R1C1 = Row Total * Column Total/ Grand Total

R1C1 14.35 R3C1 7.7

R1C2 6.15 R3C2 12.3
R1C3 12.3 R3C3 6.6
R1C4 8.2 R3C4 4.4
R2C1 9.1 R4C1 3.85
R2C2 3.9 R4C2 1.65
R2C3 7.8 R4C3 3.3
R2C4 5.2 R4C4 2.2

Calculation of 2

Observed Expected (O-E) (O-E)2 (O-E)2/E

Frequency (O) Frequency (E)
12 14.35 -2.35 5.5225 0.384843
8 6.15 1.85 3.4225 0.556504
11 12.3 -1.3 1.69 0.137398
10 8.2 1.8 3.24 0.395122
8 12 9.1 13 -1 1 0.076923
4 3.9
9 7.8 1.2 1.44 0.184615
5 5.2 -0.2 0.04 0.007692
10 11 7.7 11 0 0 0
1 3.3
8 11 6.6 11 0 0 0
3 4.4
5 11 3.85 11 0 0 0
2 1.65
2 3.3
2 2.2
1.743098
Hence, 2 tabulated at 5% level of significant for (R-1) (C-1)-6
i.e. (4-1) (4-1) - 6

i.e. 3 d.f is 3.841

Interpretation: As per table 18, it can be clearly seen that the calculated value of 2 at 5% level
of significance for 3 d.f. is 1.743098 and tabulated value of 2 is 3.841. Since tabulated value of
2 at 5% level of significance for 3 d.f. is greater than the calculated value ( i.e. 3.841>1.743098)
, the null hypothesis is accepted i.e. there is no significant relationship between observed and
expected opinion regarding the reasons influenced to investors for purchasing debt.

Hypothesis 5

In 100 random samples of respondents it, contains the following distribution, which was noted
the basis of related fields. The test is to draw the importance of bonds in investment.

Table 19

Survey Results on regarding importance of bond in investment

Listed Broker Market Individual Other

Total
Companies Makers Investors Experts

Additional capital supply 28 8 16 7 59

Tax advantage 7 7 14 13 41

Total 35 15 30 20 100

Source: Field Survey conducted by researcher

Hypothesis Testing:

Null Hypothesis (Ho): There is no significant relationship between observed and expected
opinion regarding the importance of bond in investment.

Alternative Hypothesis (H1): There is significant relationship between observed and expected
opinion regarding the importance of bond in investment.
Test Statistics: Under H0, the test statistics is 2 = 2 = (0-E)2/E

Calculation of expected frequencies

Expected frequency of R1C1 = Row Total * Column Total/ Grand Total

R1C1 20.65 R2C1 14.35

R1C2 8.85 R2C2 6.15
R1C3 17.7 R2C3 12.3
R1C4 11.8 R2C4 8.2

Calculation of 2

Observed Expected (O-E) (O-E)2 (O-E)2/E

Frequency (O) Frequency (E)
28 20.65 7.35 54.0225 2.616102
8 8.85 -0.85 0.7225 0.081638
16 17.7 -1.7 2.89 0.163277
7 11.8 -4.8 23.04 1.952542
7 14.35 -7.35 54.0225 3.764634
7 6.15 0.85 0.7225 0.11748
14 12.3 1.7 2.89 0.234959
13 8.2 4.8 23.04 2.809756
11.74039

Hence, 2 tabulated at 5% level of significant for (R-1) (C-1)-1

i.e. (2-1) (4-1) - 1

i.e. 2 d.f is 5.99

Interpretation: As per Table.19, it can be clearly seen that the calculated value of 2 at 5% level
of significance for 2 d.f. is 11.74039 and tabulated value of 2 is 5.99 Since tabulated value of 2
at 5% level of significance for 2 d.f. is less than the calculated value ( i.e. 5.99 < 11.74039), the
alternative hypothesis is accepted i.e. there is significant relationship between observed and
expected opinion regarding the importance of bond in investment
Hypothesis 6

In 100 random samples of respondents it, contains the following distribution, which was noted
the basis of related fields. The test is to draw the use of bank loan instead of issuing debenture or
bonds.

Table 20

Survey Results on Regarding To Use of Bank Loan Instead of Issuing Debenture

Listed Broker Market Individual Other

Companies Makers Investors Experts Total

Bank loan is easily

available 13 5 10 7 35

Issuing debenture is
difficult process 7 6 8 5 26

Cost of bank loan is

less than issuance
debenture 12 3 10 5 30

Other 3 1 2 3 9

Total 35 15 30 20 100

Source: Field Survey conducted by researcher

Hypothesis Testing:

Null Hypothesis (Ho): There is no significant relationship between observed and expected
opinion regarding to the use of bank loan or issuing of debenture.
Calculation of expected frequencies

Expected frequency of R1C1 = Row Total * Column Total/ Grand Total

R1C1 12.25 R3C1 10.5

R1C2 5.25 R3C2 4.5
R1C3 10.5 R3C3 9
R1C4 7 R3C4 6
R2C1 9.1 R4C1 3.15
R2C2 3.9 R4C2 1.35
R2C3 7.8 R4C3 2.7
R2C4 5.2 R4C4 1.8

Calculation of 2

Observed Expected (O-E) (O-E)2 (O-E)2/E

Frequency (O) Frequency (E)
13 12.25 0.75 0.5625 0.045918
5 5.25 -0.25 0.0625 0.011905
10 10.5 -0.5 0.25 0.02381
7 7 0 0 0
7 9.1 -2.1 4.41 0.484615
6 3.9 2.1 4.41 1.130769
8 7.8 0.2 0.04 0.005128
5 5.2 -0.2 0.04 0.007692
12 15 10.5 15 0 0
3 4.5
10 9 1 1 0.111111
5 14 6 15 -1 1 0.066667
3 3.15
1 1.35
2 2.7
3 1.8
1.887616

Hence, 2 tabulated at 5% level of significant for (R-1) (C-1)-5

i.e. (4-1) (4-1) - 5

i.e. 4 d.f is 9.49

Interpretation: As per Table 20, it can be clearly seen that the calculated value of 2 at 5% level
of significance for 4 d.f. is 1.887616 and tabulated value of 2 is 9.49. Since tabulated value of
2 at 5% level of significance for 4 d.f. is greater than the calculated value ( i.e. 9.49> 1.887616)
, the null hypothesis is accepted i.e. there is no significant relationship between observed and
expected opinion regarding to the use of bank loan or issuing of debenture.

Hypothesis 7

In 100 random samples of respondents it, contains the following distribution, which was noted
the basis of related fields. The test is to draw the preference given by the Nepalese investor
between Government bonds and corporate bonds.

Table 21

Survey Results on Regarding Preference between Government Bonds

and Corporate Bonds

Broker
Listed Market Individual Other
Companies Makers Investors Experts Total

Government bonds 15 8 21 12 56

Corporate bonds 20 7 9 8 44

Total 35 15 30 20 100

Source: Field Survey conducted by researcher

Hypothesis Testing:

Null Hypothesis (Ho): There is no significant relationship between observed and expected
opinion regarding the choice between government bonds and corporate bonds.
Alternative Hypothesis (H1): There is significant relationship between observed and expected
opinion regarding the choice between government bonds and corporate bonds.

Test Statistics: Under H0, the test statistics is 2 = 2 = (0-E)2/E

Calculation of expected frequencies

Expected frequency of R1C1 = Row Total * Column Total/ Grand Total

R1C1 19.6 R2C1 15.4

R1C2 8.4 R2C2 6.6
R1C3 16.8 R2C3 13.2
R1C4 11.2 R2C4 8.8

Calculation of 2

Observed Expected (O-E) (O-E)2 (O-E)2/E

Frequency (O) Frequency (E)
15 19.6 -4.6 21.16 1.079592
8 8.4 -0.4 0.16 0.019048
21 16. 4.2 17.64 1.05
12 11.2 0.8 0.64 0.057143
20 15.4 4.6 21.16 1.34026
7 6.6 0.4 0.16 0.024242
9 13.2 -4.2 17.64 1.336364
8 8.8 -0.8 0.64 0.072727
5.013142

Hence, 2 tabulated at 5% level of significant for (R-1) (C-1)-5

i.e. (2-1) (4-1) - 1

i.e. 5 d.f is 11.070

Interpretation: As per Table 21, it can be clearly seen that the calculated value of 2 at 5% level
of significance for 5 d.f. is 5.013412 and tabulated value of 2 is 11.070. Since tabulated value of
2 at 5% level of significance for 5 d.f. is greater than the calculated value ( i.e. 11.070>
5.013142) , the null hypothesis is accepted i.e. there is no significant relationship between
observed and expected opinion regarding the choice between and corporate bonds.
 ANNEX 5

Calculation of value of Bond

S.N Issuance Coupon Rate (K) Maturity Period Market Int. Rate
Company (Y) (K)
1 Shree Ram Sugar 14% 4 years 10.69%
Mills Limited
2 Himalayan Bank 8.50% 7 Years 5.50%
Limited
3 Nepal 6% 7 Years 5.06%
Investment Bank
Limited
4 Everest Bank 6% 7 Years 4.89%
Limited
5 Bank of 6% 7 Years 4.89%
Kathmandu
Limited

Value of bond (V0)= I(PVIFAkd%,n)+ M (PVIFkd%/, n)

For SRSM:

V0 = I/2(PVIFAkd%,n)+ M (PVIFkd%/2, n*2)

= 140/2 (PVIFA 10.69%/2, 4*2) + 1000(PVIF 10.69%/2. 4*2)

= 70 (PVIFA 5.345%, 8) + 1000(PVIF 5.345%, 8)

= 70*6.3740+ 1000*.6593

= Rs. 1105.49

For HBL:

= I/2(PVIFAkd%,n)+ M (PVIFkd%/2, n*2)

= 85/2 (PVIFA 5.5 %/2, 7*2) + 1000(PVIF 5.5 %/2. 7*2)

= 42.5 (PVIFA 5.345%, 14) + 1000(PVIF 5.345%, 14)

= 42.5*11.49+ 1000*.6840
 = Rs. 1172.33

For NIBL:

V0 = I/2(PVIFA kd%,n)+ M (PVIF kd%/2, n*2)

= 75/2 (PVIFA 5.06%/2, 7*2) + 1000(PVIF 5.06%/2. 7*2)

= 37.5 (PVIFA 2.53 %, 14) + 1000(PVIF 2.53%, 14)

= 37.5*11.67+ 1000*.7048

= Rs. 1142.43

For EBL:

V0 = I/2(PVIFAkd%,n)+ M (PVIFkd%/2, n*2)

= 60/2 (PVIFA 4.89 %/2, 7*2) + 1000(PVIF 4.89 %/2. 7*2)

= 30 (PVIFA 2.445 %, 14) + 1000(PVIF 2.445%, 14)

= 30*11.74 + 1000*.7121

= Rs. 1064.29

For BOK:

V0 = I/2 (PVIFAkd%,n)+ M (PVIFkd%/2, n*2)

= 60/2 (PVIFA 4.89 %/2, 7*2) + 1000(PVIF 4.89 %/2. 4*2)

= 30 (PVIFA 2.445 %, 14) + 1000(PVIF 2.445 %, 14)

= 30*11.74 + 1000*.7121

= Rs. 1064.29
 ANNEX 6

Calculation of Duration

S.N Issuance Coupon Rate (K) Maturity Period Market Int. Rate
Company (Y) (K)
1 Shree Ram Sugar 14% 4 years 10.69%
Mills Limited
2 Himalayan Bank 8.50% 7 Years 5.50%
Limited
3 Nepal 6% 7 Years 5.06%
Investment Bank
Limited
4 Everest Bank 6% 7 Years 4.89%
Limited
5 Bank of 6% 7 Years 4.89%
Kathmandu
Limited

Duration (MD) = 1+Y/Y (1+Y) + T(C-Y)/C(1+Y)-1)+Y)

For SRSM:

MD = 1+Y/Y (1+Y) + T(C-Y)/C(1+Y)-1)+Y)

=1+0.1069/0.1069 (1+0.1069) + 4 (0.14-0.1069)/0.14(1+0.1069)4-1) + 0/1069

=6.4463 semiannual periods.

For HBL:

=1+Y/Y (1+Y) + T(C-Y)/C(1+Y)-1)+Y)

= 1+0.055/0.055 (1+0.055) + 7 (0.085-0.055)/0.085 ( 1+0.055)7-1) + 0.055

= 5.67 semiannual periods.

For NIBL:

MD = 1+Y/Y (1+Y) + T(C-Y)/C(1+Y)-1)+Y)

= 1+0.0506/0.0506 (1+0.0506) + 7 (0.075-0.0506)/0.075 (1+0.0506)7-1 ) = 0.0506

= 5.7947 semiannual periods.

For EBL:

MD = 1+Y/Y (1+Y) + T(C-Y)/C (1+Y)-1)+Y)

= 1+0.0489/0.0489 (1+0.0489) + 7 (0.06-0.0489)/0.06 (1+0.0489)7-1) + 0.0489

= 5.9533 semiannual periods.

For BOK:

MD = 1+Y/Y (1+Y) + T(C-Y)/C (1+Y)-1)+Y)

= 1+0.0489/0.0489 (1+0.0489) + 7 (0.06-0.0489)/0.06 (1+0.0489)7-1) + 0.0489

= 5.9533 semiannual periods.