Advanced Financial Management - May 2023

(a) Mr. Bull is a rational risk taker. He takes his position in a single stock 8 for 4 days ina week. He does not take a position on Friday to avoid weekend effect and takes position only for four days in a week i.e. Monday to Thursday. He transfers the amount on Monday morning and withdraws the balance on Friday morning. He desires to make a maximum investment where Value At Risk (VAR) should not exceed the balance lying…

4. (a) An investor, in the beginning of 2022, has purchased substantial 9 Y number of 8 year 7.50% % 1000 bond with 5 % premium on maturity at a required Yield to Maturity (YTM) of 8.50 %. However, due to the continuing war in Europe, the inflation is running very high in the economies of the countries, The yield on the bonds is decréasing, The risk averse investor Wants to protect himself from further loss and decides to sell…

Big Ltd. (BL), a listed company, is enjoying a price earnings ratio yy (PER) of 15 on an Earnings Per Share (EPS) of % 5. The Total number of outstanding shares are 2,00,000. BL is proposing to acquire Small Pvt. Ltd. (SPL) an unlisted company by issuing shares in the ratio 4:5 i.e. for 5 shares of SPL 4 shares of BL will be issued. The Outstanding shares of SPL are 50,000. SPL will be listed before the actual merger…