Advanced Financial Management - May 2026 RTP

1. Mr. Y is a rational risk taker. He takes his position in derivative market of a single stock through margin trading for 4 days in a 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 take a maximum exposure in the derivative market where…

2. An Indian exporting firm, Radhey & Sons exported dry fruits worth of AUD 1 million to an importer in Sydney. Radhey and Sons are worried about likely depreciation of AUD in near future as it is likely that the export sum will be received after 3 months. Today as such as there is no derivative contract is available in AUD to hedge itself from such depreciation. The following data is given: Spot rate : % 64.00/AUD 3 months interest…

Free Solutions (TFS) is a reputed is logistic service providers. All the deliveries are made by drivers of the mini trucks. The company employs many drivers, each of whom is provided with small trucks to make deliveries. Each driver drives approximately 40000 kms per annuam. TFS decides to continue its present policy of always buying a new truck for its drivers but wonders whether the present policy of replacing the truck every three year is optimal or not. It is…

4. The data given below relates to a convertible bond: Face value = 1,000 Coupon rate 12% No. of shares per bond 20 Market price of share = 48 Straight value of bond = 940 Market price of convertible bond = 1,060 Calculate: (i) Stock value of bond. (ii) | The percentage of downside risk. (iii) ~The conversion premium (iv) The conversion parity price of the stock.

5. Mr. A is thinking of buying shares at = 500 each having face value of % 100. He is expecting a bonus at the ratio of 1: 5 during the fourth year. Annual expected dividend is 20% and the same rate is expected to be maintained on the expanded capital base. He intends to sell the shares at the end of seventh year at an expected price of % 900 each. Incidental expenses for purchase and sale of shares…

Present Value Factors should be used up to three decimal places, and the final calculations should be rounded off to two decimal places. Business Valuation

6. The following data pertains to XYZ Inc. engaged in software consultancy business as on 31 December 2024. ($ Million) Income from consultancy 935.00 EBIT 180.00 Less: Interest on Loan 18.00 EBT 162.00 Tax @ 35% 56.70 105.30 Balance Sheet ($ Million) Liabilities Amount Assets Amount Equity Stock (10 million 100} Land and Building 200 share @ $ 10 each) Computers & Softwares 295 Reserves & Surplus 325 | Current Assets: Loans 180 Debtors 150 Current Liabilities 180 Bank 100…

7. Following is the information available pertaining to shares of Omni Ltd.: Current Market Price (2) = 840.00 Strike Price (%) = 900.00 Maximum Price (%) expected in next 3 months’ time % 1,050.00 Minimum Price (%) expected in next 3 months’ time = 756.00 Continuously Compounded Rate of Interest (p.a.) 8.00% e* 1.0202 Based on the above, calculate the value of the 3-month call option using the Binomial Method and the Risk-Neutral Method, and also draw a conclusion. Note…