Advanced Financial Management - October 2020 MTP

(a) Derivative Bank entered into a swap arrangement on a principal of ` 10 crores and agreed to receive MIBOR overnight floating rate for a fixed payment on the principal. The swap was entered into on Monday, 19th August, 2019 and was to commence on 20th August, 2019 and run for a period of 7 days. Respective MIBOR rates for Tuesday to Monday were: 8.15%, 7.98%, 7.95%, 8.12%, 8.15%, 7.75%. If Fixed Rate of Interest is 8%, then evaluate (i)…

(a) You as a dealer in foreign exchange have the following position in GBP on 31 st October, 2019: Balance in the Nostro A/c Credit Opening Position Overbought Purchased a bill on London 2,00,000 1,00,000 1,60,000 Sold forward TT 1,20,000 Forward purchase contract cancelled 60,000 Remitted by TT 1,50,000 Draft on London cancelled 60,000 Decide the steps would you take, if you are required to maintain a credit Balance of GBP 65,000 in the Nostro A/c and keep as oversold…

(a) MK Ltd. is considering acquiring NN Ltd. The following information is available: Company Earning after Tax (`) No. of Equity Shares Market Value Per Share (`) MK Ltd. 60,00,000 12,00,000 200.00 NN Ltd. 18,00,000 3,00,000 160.00 Exchange of equity shares for acquisition is based on current market value as above. There is no synergy advantage available. (i) Find the earning per share for company MK Ltd. after merger, and (ii) Find the exchange ratio so that shareholders of NN…

(iv) Number of days investment held. (8 Marks) (c) Explain various Asset Allocation Strategies. (4 Marks) (a) Ram buys 10,000 shares of X Ltd. at a price of ` 22 per share whose beta value is 1.5 and sells 5,000 shares of A Ltd. at a price of ` 40 per share having a beta value of 2. He obtains a complete hedge by Nifty futures at ` 1,000 each. He closes out his position at the closing price of…

Mr. A, a HNI invested on 1.4.2014 in certain equity shares as below: Name of Co. No. of shares Cost (`) X Ltd. 1,00,000 (` 100 each) 2,00,00,000 Y Ltd. 50,000 (` 10 each) 1,50,00,000 (6 Marks) In September 2014, 10% dividend was paid out by X Ltd. and in October 2014, 30% dividend paid out by Y Ltd. On 31.3.2015 market quotations showed a value of ` 220 and ` 290 per share for X Ltd. and Y Ltd.…

(a) XYZ Ltd. has imported goods to the extent of US$ 8 Million. The payment terms are as under: (1) 1% discount if full amount is paid immediately or (2) 60 days interest free credit. However, in case of a further delay up to 30 days, interest at th e rate of 8% p.a. will be charged for additional days after 60 days. M/s XYZ Ltd. has ` 25 Lakh available and for remaining it has an offer from bank…