AIWMI Certified Credit Research Analyst - Level 2 CCRA-L2 Exam Questions
Question #1 (Topic: demo questions)
Scott is a credit analyst with one of the credit rating agencies in Indi a. He was looking in Oil and Gas Industry companies and has presented brief financials for following 4 entities:
| Particulars | A Ltd | B Ltd | C Ltd | D Ltd |
| Total Income | 2000 | 2400 | 3000 | 3500 |
| EBITDA | 500 | 550 | 650 | 460 |
| Interest | 100 | 100 | 125 | 130 |
| Total Debt | 1000 | 1400 | 1000 | 1500 |
Correct Answer: A
Explanation not available for this question.
Question #2 (Topic: demo questions)
Scott is a credit analyst with one of the credit rating agencies in Indi a. He was looking in Oil and Gas Industry companies and has presented brief financials for following 4 entities:
| Particulars | A Ltd | B Ltd | C Ltd | D Ltd |
| Total Income | 2000 | 2400 | 3000 | 3500 |
| EBITDA | 500 | 550 | 650 | 460 |
| Interest | 100 | 100 | 125 | 130 |
| Total Debt | 1000 | 1400 | 1000 |
Correct Answer: D
Explanation not available for this question.
Question #3 (Topic: demo questions)
Mark Construction Company (MCC) has bagged a contract for construction of a large dam and hydro
power project on river Shivna in Madhya Pradesh (MP). The project is also of relevance from the
irrigation perspective due to its location and as per the agreement MCC will have to undertake
construction of web of canals, approach road to dam, power house and other ancillary units. MCC is
promoted by Mr. Thomas Mark, who is a MP from the ruling party which recently formed government
in MP. Historically, MCC has been engaged into construction of rural roads, small bridges and railway
platforms on contract basis for the Government. MCC will have a separate special purpose vehicle
(SPV) floated for this venture. The hydro power project comes under the public private partnership
scheme of the Government of MP, where in the private partner builds owns operates and transfers
(BOOT) the hydro power plant. The detailed terms of the hydro power project agreement are as
follows: 1. The construction of the dam, canals and hydro power plant shall be undertaken by the
contractor. The Government of MP will have to acquire land which will submerge on construction of
dam and shall rehabilitate the owners of land. 2. MCC shall have right to operate the hydro power
project from date of commencement of commercial operations (DCCO) for a period of 20 years and
shall transfer the project to Government thereafter. Further, SPV shall be tax exempt for a period of
five years from DCCO i.e. FY17-FY21. 3. The power project is of 600 megawatts (MW) shall comprise 4
units of 150 MW each. The estimated cost of project is about INR3, 500 Million to be spent over a
period of 4 year(s) the project is estimated to be commercially operational by April 1, 2016 with two
units operational on same day and one unit each will be operational on April 1, 2017 and April 1, 2018.
4. Means of finance:
Table 1: Means of Finance
| Means of Finance | INR Million |
| Government Aid (To be classified as Equity) | 500 |
| Equity | 900 |
| Debt | 2100 |
5. Amount if expenditure estimated in various years is as follows:
| Funding | |||||
| Cost of Project | INR Million | Debt | Govt Aid | Equity | Total |
| FY13 (April to march) | 700 | 0 | 250 | 450 | 700 |
| FY14 | 1200 | 500 | 250 | 450 | 1200 |
| FY15 | 1200 | 1200 | - | 1200 | |
| FY15 | 400 | 400 | - | 400 |
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the principal. The expected principal along with capitalized interest is expected to be INR2,400 Million (i.e. INR2100 Million debt plus INR300 Million capitalized interest). The repayment of the same shall be in 12 equated annual installments starting from FY17. Brief projections for the period of FY17 to FY21 are given below:
Table 3: Financial Projections (FY17 - FY21)
Developments as on March 31, 2015 The project manager for the SPV made following comments at a press conferee on March 31, 2015: As you all are aware, we were running bang on schedule till we last met on December 21, 2014. From today we are just left with one more year to complete the project in time. However, the flash floods which struck our dam site on this March 15, 2015 have created havoc in the region. I shall not point out the loss of lives in the region as you all are well aware of those. Our project has also been badly hit due to the same and we have been assessing the damage over the last one week. After analyzing damage, we have made changes in project schedule. Now we will be making only one unit of 150 MW operational on April 1, 2016 and 1 unit each will be added in each of subsequent year(s). Development as on September 30, 2015 Post the flash floods, lot of environmentalists started raising issues of changes in environment due to construction of large number of dams. A few Public Interest Litigations (PILs) have been filed in various courts. Honorable High Court of MP on September 27, 2015, banned construction of any dams in the region and banned permissions for new dams till next hearing scheduled on November 30, 2015. MCC in its press release has indicated that they will apply to the higher court on the matter. As a credit analyst on March 31, 2012, which of the following sets of risks are you going to put in your credit appraisal note?
| Particular | FY17 | FY18 | FY19 | FY20 | FY21 |
| Revenue from Power sale | 600 | 900 | 1200 | 1320 | 1452 |
| EBITDA % | 72% | 68% | 65% | 60% | 60% |
| Interest Cost | 240.00 | 220.00 | 200.00 | 180.00 | 160.00 |
| Depreciation | 175.00 | 175.00 | 175.00 | 175.00 | 175.00 |
| PAT | 17.00 | 217.00 | 405.00 | 437.00 | 536.20 |
Correct Answer: C
Explanation:
Option C is correct because the case clearly identifies two major risks associated with the project: cost and time overrun risk and lack of management experience in large projects. The hydro power project is a large-scale infrastructure project with an estimated cost of INR 3,500 million and a four-year construction period, making delays and cost escalations highly likely. Additionally, MCC has previously been involved only in constructing rural roads, small bridges, and railway platforms, and has no experience in executing a project of this magnitude. Therefore, the company's lack of expertise in managing such a complex hydro power project represents a significant risk. The other options include risks such as off-take risk, exchange rate risk, obsolete technology risk, and political risk, which are either not mentioned or not supported by the facts provided in the case. Hence, Option C is the most appropriate answer.
Question #4 (Topic: demo questions)
Mark Construction Company (MCC) has bagged a contract for construction of a large dam and hydro power project on river Shivna in Madhya Pradesh (MP). The project is also of relevance from the irrigation perspective due to its location and as per the agreement MCC will have to undertake construction of web of canals, approach road to dam, power house and other ancillary units. MCC is promoted by Mr. Thomas Mark, who is a MP from the ruling party which recently formed government in MP. Historically, MCC has been engaged into construction of rural roads, small bridges and railway platforms on contract basis for the Government. MCC will have a separate special purpose vehicle (SPV) floated for this venture. The hydro power project comes under the public private partnership scheme of the Government of MP, where in the private partner builds owns operates and transfers (BOOT) the hydro power plant. The detailed terms of the hydro power project agreement are as follows: 1. The construction of the dam, canals and hydro power plant shall be undertaken by the contractor. The Government of MP will have to acquire land which will submerge on construction of dam and shall rehabilitate the owners of land. 2. MCC shall have right to operate the hydro power project from date of commencement of commercial operations (DCCO) for a period of 20 years and shall transfer the project to Government thereafter. Further, SPV shall be tax exempt for a period of five years from DCCO i.e. FY17-FY21. 3. The power project is of 600 megawatts (MW) shall comprise 4 units of 150 MW each. The estimated cost of project is about INR3, 500 Million to be spent over a period of 4 year(s) the project is estimated to be commercially operational by April 1, 2016 with two units operational om same day and one unit each will be operational on April 1, 2017 and April 1, 2018. 4. Means of finance:
Table 1: Means of Finance
Text Block 1
Means of Finance INR Million
Government Aid (To be classified as Equity) 500Equity 900 Debt 2100
5. Amount if expenditure estimated in various years is as follows:
Means of Finance INR Million Government Aid (To be classified as Equity) 500Equity 900 Debt 2100 5. Amount if expenditure estimated in various years is as follows:
Table 2: Project Expenditure & Funding Breakdown
Text Block 2
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the principal. The expected principal along with capitalized interest is expected to be INR2, 400 Million (i.e.INR2100 Million debt plus INR300 Million capitalized interest). The repaym
Debt shall bear a fixed rate of interest of 10% and all interest till DCCO shall be added to the principal. The expected principal along with capitalized interest is expected to be INR2, 400 Million (i.e.INR2100 Million debt plus INR300 Million capitalized interest). The repaym
Table 3: Financial Projections (FY17 - FY21)
Correct Answer: B
Explanation:
Option B is correct because the flash floods delayed the commissioning schedule, reducing power generation capacity in the initial years. Instead of operating two 150 MW units in FY17 as originally planned, only one unit becomes operational, while additional units are commissioned in subsequent years. Since revenue is directly linked to power production and EBITDA margins remain unchanged, the revised revenues and EBITDA decrease accordingly, whereas interest expense remains unchanged because the debt obligations are fixed. Interest Coverage Ratio (ICR) is calculated as EBITDA ÷ Interest Expense. Based on the revised projections, the ICR for FY17 is 1.85 times and for FY18 is 2.93 times. Therefore, the correct answer is Option B (FY17: 1.85; FY18: 2.93).
Question #5 (Topic: demo questions)
Scott is a credit analyst with one of the credit rating agencies in Indi a. He was looking in Oil and Gas Industry companies and has presented brief financials for following 4 entities: Two credit analysts are discussing the DM-approach to credit risk modeling. They make the following statements: Analyst A: A portfolio’s standard deviation of credit losses can be determined by considering the standard deviation of credit losses of individual exposures in the portfolio and summing them all up. Analyst B: I do not fully agree with that. Apart from individual standard deviations, one also needs to consider the correlation of the exposure with the rest of the portfolio so as to account for diversification effects. Higher correlations among credit exposures will lead to higher standard deviation of the overall portfolio.
Correct Answer: C
Explanation: