Advanced Financial Management - Nov 2023 RTP

The closing value of Sensex for the month of October, 2007 is given below: Date Closing Sensex Value 1.10.07 3.10.07 2800 2780 4.10.07 2795 5.10.07 2830 8.10.07 9.10.07 2760 2790 10.10.07 11.10.07 2880 2960 12.10.07 2990 15.10.07 16.10.07 3200 3300 17.10.07 19.10.07 3450 3360 22.10.07 23.10.07 3290 3360 24.10.07 25.10.07 3340 3290 29.10.07 30.10.07 3240 3140 31.10.07 3260 You are required to test the weak form of efficient market hypothesis by applying the run test at 5% and 10% level…

XYZ company has current earnings of ` 3 per share with 5,00,000 shares outstanding. The company plans to issue 40,000, 7% convertible preference shares of ` 50 each at par. The preference shares are convertible into 2 shares for each preferenc e shares held. The equity share has a current market price of ` 21 per share. (i) What is preference share’s conversion value? (ii) What is conversion premium in %? (iii) Assuming that total earnings remain the same, calculate…

A share of Tension-free Economy Ltd. is currently quoted at, a price earnings ratio of 7.5 times. The expected retained earnings per share being 37.5% is ` 3 per share. Compute: (a) The company’s cost of equity, if investors expect annual growth rate of 12%. (b) If anticipated growth rate is 13% p.a., calculate the indicated market price, with same cost of capital. (c) If the company’s cost of capital is 18% and anticipated growth rate is 15% p.a., calculate…

John inherited the following securities on his uncle’s death: Types of Security Nos. Annual Coupon % Maturity Years Yield % Bond A (` 1,000) 10 9 3 12 Bond B (` 1,000) 10 10 5 12 Preference shares C (` 100) 100 11 13* Preference shares D (` 100) 100 12 13* *likelihood of being called at a premium over par. Compute the current value of his uncle’s portfolio. PVF @12% 1 2 3 4 5 0.893 0.797 0.712 0.636…

Invested ` 50,000/- at initial offer in Mutual Funds at a face value of ` 10 each per unit. On 31-03-2011, a dividend was paid @ 10% and annualized yield was 120%. On 31-03-2012, 20% dividend and capital gain of ` 0.60 per unit was given. Mr. X redeemed all his 6271.98 units when his annualized yield was 71.50% over the period of holding. Calculate NAV as on 31-03-2011, 31-03-2012 and 31-03-2013. Note: For calculations consider a year of 12…

A company is long on 10 MT of copper @ ` 474 per kg (spot) and intends to remain so for the ensuing quarter. The standard deviation of changes of its spot and future prices are 4% and 6% respectively, having correlation coefficient of 0.75. What is its hedge ratio? What is the amount of the copper future it should short to achieve a perfect hedge if initial margin is 8%? Foreign Exchange Exposure & Risk Management

The following table shows interest rates for the United States Dollar and French Franc. The spot exchange rate is 7.05 Franc per Dollar. Complete the missing entries: 3 Months 6 Months 1 Year Dollar interest rate (annually compounded) 11½% 12¼% Franc interest rate (annually compounded) 19½% 20% Forward Franc per Dollar 7.5200 Forward discount per Franc (percent per year) 6.3% 4

Suppose you are a treasurer of XYZ plc in the UK. XYZ have two overseas subsidiaries, one based in Amsterdam and one in Switzerland. The Dutch subsidiary has surplus Euros in the amount of 725,000 which it does not need for the next three months but which will be needed at the end of that period (91 days). The Swiss subsidiary has a surplus of Swiss Francs in the amount of 998,077 that, again, it will need on day 91.…