Advanced Financial Management - May 2022 RTP

Mr. A is holding 1000 shares of face value of ` 100 each of M/s. ABC Ltd. He wants to hold these shares for long term and have no intention to sell. On 1st January 2020, M/s XYZ Ltd. has made short sales of M/s. ABC Ltd.’s shares and approached Mr. A to lend his shares under Stock Lending Scheme with f ollowing terms: (i) Shares to be borrowed for 3 months from 01-01-2020 to 31-03-2020, (ii) Lending Charges/Fees of…

Following is the information for the options free bond: Face value of the bond Coupon rate ` 1,000 7% Terms of Maturity 7 years Yield to Maturity 8% 2 You are required to calculate: (i) Market price of the bound and duration. (ii) If there is an increase in yield by 35 basis points, what would be the price of bond? Present Value t1 t2 t3 t4 t5 t6 t7 PVIF0.07,t 0.935 0.874 0.817 0.764 0.714 0.667 0.623 PVIF0.08,t 0.926…

Mr. A is having 1 lakh shares of K Ltd. The beta of the company is 1.40. Mr. B a financial advisor has suggested having the following portfolio: Security % holding L M N O 1.20 0.75 0.40 1.40 10 10 30 50 100 Market Return is 12% Risk free rate is 8% You. Are required to calculate the following for the present investment and suggested portfolio: (i) What is the expected return based on CAPM and also (1) If…

Mayuri is interested to construct a Portfolio of Securities X and Y. She has collected the following information: X Y Expected Return (ER) 19% 23% Risk (  ) 14% 18% PAPER 2: STRATEGIC FINANCIAL MANAGEMENT 3 Mayuri has 5 Portfolio options of X and Y as follows: (i) 50% of funds in each X and Y (ii) 75% of funds in X and 25% in Y (iii) 25% of funds in X and 75% in Y (iv) 60% of…

On 1st April, an open ended scheme of mutual fund had 400 lakh units outstanding with Net Assets Value (NAV) of `19. At the end of April, it issued 5 lakh units at an opening NAV plus 2% load, adjusted for dividend equalization. At the end of May, 4 Lakh units were repurchased at the opening NAV less 2% exit load adjusted for dividend equilization. At the end of June, 60% of its available income was distributed. In respect of…

Mr. P established the following spread on the Coastal Corporation’s stock: (i) Purchased one 3-month call option with a premium of ` 6.5 and an Exercise price of ` 110. (ii) Purchased one 3-month put option with a premium of ` 10 and an Exercise price of ` 90. Coastal Corporation’s stock is currently selling at ` 100. Determine profit or loss, if the price of Coastal Corporation’s stock: (i) Remains at ` 100 after 3 months. (ii) Falls at…

Following information is available for consideration: BSE Index Value of portfolio 25,000 ` 50,50,000 Risk free interest rate 9% p.a. Dividend yield on Index 6% p.a. Beta of portfolio 1.5 We assume that a future contract on the BSE index with 4 months maturity is used to hedge the value of portfolio over next 3 months. One future contract is for delivery of 50 times the index. Based on the above information calculate: (i) Price of future contract. (ii) Gain…

A US investor chose to invest in Sensex for a period of one year. The relevant information is given below. Size of investment ($) 20,00,000 Spot rate 1 year ago (`/$) 42.50/60 Spot rate now (`/$) 43.85/ PAPER 2: STRATEGIC FINANCIAL MANAGEMENT (i) Sensex 1 year ago 3,256 Senex now Inflation in US 3,765 5% Inflation in India 9% 5 Compute the nominal rate of return to the US investor. (ii) Compute the real depreciation /appreciation of Rupee. (iii) What…