FLIP Finance and Banking Practice Test 2

April 3, 2018 | Author: Aaditya Chawla | Category: Bonds (Finance), Yield (Finance), Cost Of Capital, Capital Structure, Investing



FLIP Finance & Banking FundamPractice Test 2 - Solut www.learnwithflip.com Please click on the particular cell to see the calculation 1 Krishna owns 200 shares of XYZ technologies, which he decides to sell, at the market price, i.e. the best can get at that time in the market. Following were the five best quotes in the market, all in INR (part-fill Price 51.50 51.45 51.40 51.30 51.20 a) INR 10107.9 b) INR 10,189.8 c) INR 10,206.9 d) INR 10,263.0 Quantity 105.00 45.00 90.00 50.00 300.00 What is the total sale amount that Krishna will take home, after paying a 1% commission to the broker? Solution As part-fill is allowed, Krishna can sell Quantity 105 shares at 45 shares at 50 shares at Price 51.50 51.45 51.40 2 The ABC Company has the following capital structure: Capital Component Common Shares Preference Shares Debentures What is the average cost of capital? a) 11.72 b) 12.25 c) 5.86 d) 2.72 Cost 12% 10% 14% We need to find the price for 91 days.5 lakh loan @16% Solution Option a .25% p. INR 2. and 3 equal shareholders – Mr.93 d) None of the above Solution The yield is given as 4. INR 10 lakh for 2/3 share of the company c.Will be the wisest option.The cost of debt (at 16%) is higher than the cost of debt available incase of option a. what price bids would have been accepted by RBI? Note: T-bills are issued at a discount to face value and redeemed at face value a) 98.25%.10 0. INR 5 lakh bank loan @ 14 % b.5 lakh for 1/5th share of the company.Solution Common Shares Preference Shares Capital Component Cost of Capital 0. as it’s the most balanced one Option b .a.12 0.14 Debentures Average cost of capital (Sum of Cost of Capital*Weightage) 3 A company Mirza & Daughters. INR 5 lakh for a quarter share of the company. is 5 years old with a turnover of INR 10 lakh. as company's turnover is only INR 10 lakh Option d . It has only equity capital. 4 If the 91-day T-bill auction in India had a cut off yield of 4. Mirza and his two daughters.94 b) 98. Which would be the wisest choice to raise capital? a. INR 10 lakh bank loan @16% d. . They now need INR 10 lakh more for expansion. INR 7. for a face value of INR 100.95 c) 98.Will lead to a change in the ownership Option c – There is a high chance of default. you will get NAV less exit load charged.10 Solution NAV = INR 10/unit If you sell the unit. your rate of return ((15 . What is the rate of return on your investment? a) 26.33% d) Depends on the entry and exit load You will be able to sell the fund.25 per unit.12. at the repurchase price quoted by the mutual fund.50 respectively.45% Solution 6 A fund has a NAV of INR 10 per unit.90/unit 7 Which of the following is false regarding open ended mutual funds? a) The number of units and corpus can vary daily . What is the price at which.45% c) 18.0425*91/365)=98.25)/12. one year ago. you can sell the units? a) INR 10 b) INR 10.53% b) 22.Price for T-bills (91-days) = 100/(1+0. It has an entry load of 2% and an exit load of 1%.95 5 You bought units in a mutual fund at INR 12. Price at which you can sell the units = 10*(1-0.25) Please note that the purchase and sale price quoted by mutual fund will include the entry and exit load. if applicable 22. Hence.20 c) INR 9.01) INR 9.90 d) INR 10. The mutual fund quotes its latest repurchase price and sale price as INR 15 and INR 15. total corpus Solution and units varies daily. investors can purchase the units of the fund from the fund company. The interest rate on Debt Capital is 5% p.4% Return on Investment (ROI) which includes both equity and debt. if the yield is 7.8% c) 5.08) Less Interest ((100/2)*0.00 b) 90. and sell it back to the company. Hence.a.5%? a) 130. with a Debt-Equity ratio of 1:1. Assume a tax rate of 20%.5 1. option c is correct. 8 Catalyst Corporation has a capital of INR 100 Million.80% Solution 9 What is the price of a 5 year 6% annual coupon bond (FV 100). However.a.1 4. is 8%.b) The funds have a pre-defined investment objective c) The funds offer a guaranteed rate of return d) Both b & c In case of an open-ended fund. Hence. EBIT (100*0.55 . and the return on investment is 8% p.05) EBT Less Tax (20% of EBT) PAT Return on Equity (PAT/Equity Capital Employed) In million 8. it doesn't offer any guaranteed rate of return.5% d) 4. Also. the fund can have a predefined investment objective. at any time.4 8.5 5.0 2. What is the company’s return on equity? a) 11% b) 8. 32 Solution Face Value Yield Coupon Year 1 2 3 4 5 Bond Price (Sum of the present value of all inflows) 100 0.c) 93. This analysis is part of : a) Trading Stage b) Pre-trade Stage c) Post trade Stage d) Asset Servicing Stage Option b is correct. The trader expects a hung parliament. to take invesment decision .060 Inflows 6 6 6 6 106 10 Which of the following ratios best describes the capital structure of a company? a) EBIT/Debt b) PAT/Total Debt c) Debt/ Equity d) PAT/Total number of paid-up shares Option c is correct. This ratio indicate the proportion in Solution which the company is using equity and debt tto finance its assets.075 0. 11 Election results are going to be announced tomorrow. the investor look Solution for the information related to the instruments and markets.93 d) 106. At Pre-trade stage. 6330*3.8700*1. GBP 1 = 1.12 Rate scenario: USD 1 = MYR 3.6230 = 6. if the market price is 105? a) 6% b) 4. when the yield is 4.6330 = 6.2810 c) 3.3279 13 What is the yield of a 5 year 6% annual coupon bond (FV 100). You can also use goal-seek function. GBP 1 = USD 1. The offer rate for USD 1 = MYR 3. Year 1 2 3 4 5 Bond Price (Summation of all the cash flows) CashFlow 6 6 6 6 106 .8750 The offer rate for GBP 1 = USD 1.6320 = 6.85%.30.8750*1.6320 .3279 b) 3.6330 = 6.3240 Solution We will need to calculate the cross rate between GBP and MYR. A Malaysian importer wants to buy GBP and sell Malaysian ringgitt.5% d) None of the above We have used hit and trial method to get the answer.8750 = MYR 6.8750*1. What will be his break-even rate? a) 3.8700 .85% c) 7.3197 d) 3.50. You Solution will find that the bond price is INR 105.8700*1.6330 Therefore. 7902/12 Correct option is Dealer B. I will choose the dealer having the highest bid rate. the bid rate is highest for Dealer B. Bid Rate 1. Both direct and indirect quotes are included. I will sell GBP to Dealer B. Dealer A Dealer B Dealer C Dealer D As we see.7900/10 1. Here. the base currency is GBP.2641/46 .2638/43 1. Dealers Dealer A Dealer B Dealer C Dealer D To which dealer would you sell GBP? a) Dealer A b) Dealer B c) Dealer D d) Dealer C GBP:USD 1.79 1.2639/44 1.7907 1.7905/15 1.7902 15 You are given two-way (bid/offer) prices for various currency pairs against a range of counter-currencies. Solution As I have to sell GBP.7907/17 1. Dealers Dealer A Dealer B Dealer C Dealer D From which dealer would you buy USD? a) Dealer B b) Dealer C c) Dealer A d) Dealer D USD:CHF 1.2640/45 1. Hence.14 You are given two-way (bid/offer) prices for various currency pairs against a range of counter-currencies. Both direct and indirect quotes are included.7905 1. Offer Rate 1. Hence.2645 1. the offer rate is lowest for Dealer C. I will buy USD from Dealer C. I will choose the dealer having the lowest offer rate.2646 . As I have to buy USD.2644 1. the base currency is Solution USD. Here. Dealer A Dealer B Dealer C Dealer D As we see.2643 1.Correct option is Dealer C. i.08 23.Solution www.1 2544.learnwithflip. the best price that he es in the market. at the market price.3 10189.25 2570.70 Total amount Amount Realized 5353.India Practice Test 2 . all in INR (part-fill is allowed).nance & Banking Fundamentals .8 Amount 3750000 312500 937500 . ng a 1% commission to the broker? Amount 5407.00 Brokerage 54.15 25.e.4 2292.50 2315.com n ell. 19 Cost of Capital * Weightage 0.00625 0.Amount 3750000 312500 937500 5000000 Weightage 0.75 0.06 0.25% 10 lakh.02625 12. It has only equity They now need INR 10 lakh al? .09 0. . . 84 93.58 5.93 .83 4.19 4.49 73.Present Value 5. 660377 5.5%) 5.037716 4.93 .00 Present Value (Assuming yield as 7.835215 93.581395 5.205302 4.722461 5.649566 105.964523 83.457759 5.191996 4.Present Value (Assuming yield as 6%) 5.339979 5.85%) 5.492803 73.00 Present Value (Assuming yield as 4.752562 79.829763 4.209366 100.
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