Advanced Financial Management - May 2019 MTP

A Mutual Fund is holding the following assets in Rs. Crores : Investments in diversified equity shares 90.00 Cash and Bank Balances 10.00 100.00 The Beta of the portfolio is 1.1. The index future is selling at 4300 level. The Fund Manager apprehends that the index will fall at the most by 10%. Calculate the number of index futures he should short for perfect hedging. One index future consists of 50 units. Evaluate your answer assuming the Fund Manager's apprehension…

(a) TM Fincorp has bought a 6 x 9 Rs. 100 crore Forward Rate Agreement (FRA) at 5.25%. On fixing date reference rate i.e. MIBOR turns out be as follows: Period 3 months 6 months 9 months Rate (%) 5.50 5.70 5.85 You are required to calculate: (i) Profit/Loss to TM Fincorp. in terms of basis points. (ii) The settlement amount. (Assume 360 days in a year) (8 Marks) (b) The risk-free rate of return Rf is 9 percent. The…

January 1, 2013 an investor have a portfolio of 5 shares as given below: Security A B C D E Price 349.30 480.50 593.52 734.70 824.85 No. of Shares 5,000 7,000 8,000 10,000 2,000 1.15 0.40 0.90 0.95 0.85 The cost of capital to the investor is 10.5% per annum. You are required to calculate: (i) The beta of his portfolio. (ii) The theoretical value of the NIFTY futures for February 2013. (iii) The number of contracts of NIFTY the…

(a) Orange purchased 200 units of Oxygen Mutual Fund at Rs. 45 per unit on 31 st December, 2009. In 2010, he received Rs. 1.00 as dividend per unit and a capital gains distribution of Rs. 2 per unit. Required: (i) Calculate the return for the period of one year assuming that the NAV as on 31 st December 2010 was Rs. 48 per unit. (ii) Calculate the return for the period of one year assuming that the NAV as…

(a) You have following quotes from Bank A and Bank B: 3 months 6 months 3 months 6 months Bank A USD/CHF 1.4650/55 5/10 10/15 GBP/USD 1.7645/60 25/20 35/25 Bank B USD/CHF 1.4653/60 GBP/USD 1.7640/50 Calculate: (i) How much minimum CHF amount you have to pay for 1 Million GBP spot? (ii) Considering the quotes from Bank A only, for GBP/CHF what are the Implied Swap points for Spot over 3 months? (8 Marks) (b) Delta Ltd.’s current financial year’s…

Nishan Ltd. has 35,000 shares of equity stock outstanding with a book value of Rs.20 per share. It owes debt Rs. 15,00,000 at an interest rate of 12%. Selected financial results are as follows. Income and Cash Flow Rs. 80,000 Capital Rs. 1,500,000 Interest Equity 7,00,000 1,80,000 (Rs. 1,00,000) 0 (Rs. 1,00,000) Depreciation Rs. 50,000 Principal repayment (Rs. 75,000) Cash Flow (Rs. 1,25,000) Rs. 2,200,000 Evaluate and Restructure the financial line items shown assuming a composition in which creditors agree…

(a) The following information is available in respect of Security X Equilibrium Return Market Return 7% Treasury Bond Trading at Covariance of Market Return and Security Return Coefficient of Correlation 15% 15% $140 225% 0.75 You are required to determine the Standard Deviation of Market Return and Security Return. (5 Marks) (b) M/s Atlantic Company Limited with a turnover of Rs. 4.80 crores is expecting growth of 25% for forthcoming year. Average credit period is 90 days. The past experience…

(a) Skylark Airways is planning to acquire a light commercial aircraft for flying class clients at an investment of Rs. 50,00,000. The expected cash flow after tax for the next three years is as follows: (Rs.) Year 1 Year 2 Year 3 Probability Probability Probability 14,00,000 18,00,000 25,00,000 40,00,000 0.1 0.2 0.4 0.3 15,00,000 20,00,000 32,00,000 45,00,000 0.1 0.3 0.4 0.2 18,00,000 25,00,000 35,00,000 48,00,000 0.2 0.5 0.2 0.1 The Company wishes to take into consideration all possible risk factors…