fin622 collection of old papers

8/8/2019 FIN622 Collection of Old Papers

http://slidepdf.com/reader/full/fin622-collection-of-old-papers 1/18

http://vujannat.ning.comBEST SITE TO HELP STUDENTS

MIDTERM EXAMINATION

SPRING 2008

FIN622 - CORPORATE FINANCE (Session - 1 )

Marks: 40

Time: 60min

StudentID/LoginID: ______________________________

Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date:Monday, June 09, 2008

Read the following instructions carefully before attempting any question:

§All questions are compulsory.



§This exam consists of 10 Multiple Choice Questions carrying 1 mark each; 5 True/False carrying1 mark each, 3 Short Questions carrying 5 marks each; and 1 Long Question carrying 10

marks.

§For each MCQ, read the available choices carefully and select the most appropriate choice which

you consider is the correct answer, by clicking on the appropriate check box.

§Remember, not to spend, too much time on any one objective type question, since all objective

type questions carry equal marks; it is important to manage your time according to the marksallocated to each question.

§Use of Calculators and Financial Tables is allowed.

§You are required to show all the working of numerical questions.

§This examination is closed book, closed notes and closed neighbors.

§ Attempt paper to the best of your understanding.

§ If you believe that some essential piece of information is missing, make an appropriate assumptionand use it to solve the problem.

§Save your answer before proceeding to the next question.

§Do not click the “Finish” button while solving your paper. Once you clicked the “Finish” button,

you will not be able to access your paper again. Click it at the end of your paper. That means you

have submitted your complete paper.

§A clock is given in the exam software. Software will automatically close at the end of given

time.

§Use of mobile phone is strictly prohibited. Switch off your mobile phone during the

examination.

§Failure to comply with the Supervisor’s directions will result in your test being cancelled. Please

comply with supervisor’s directions to avoid any unpleasant event.

For Teacher's use only

Question

123456789

10Total



Marks

Question11

1213141516171819

Marks

Question



Marks

Question No: 1 ( Marks: 1 ) - Please choose one

An analysis of percentage financial statements where all balance sheet or income statement figures

for a base year equal 100.0% and subsequent financial statement items are expressed as percentages

of their values in the base year is known as ________.

►

Common-size analysis

►

Fundamental analysis



►

Index analysis

►

Discriminated analysis


What is the future value of Rs.1.00 invested for 10 years if 12 percent annual rate of interest is

compounded quarterly?

►

Rs.2.30

►

Rs.3.26



►

Rs.3.25

►

Rs.2.93


When the market's nominal annual required rate of return for a particular bond is less than its

coupon rate, the bond will be selling at ________.

►

Discount

►

Premium



►

Par value

►

An indeterminate price


Which of the following is a method of evaluating securities by analyzing statistics generated by

market activities, such as past prices and volumes?

►

Technical analysis

►

Fundamental analysis



►

Common size analysis

►

Ratio analysis


Which of the following capital budgeting technique ignores profitability and time value of money?

►

Net present value

►

Internal rate of return



►

Discounted pay back period

►

Simple pay back period


Which of the following method should be used to evaluate the riskiness of an investment?

►

Profitability index

►

Sensitivity analysis

►



►

Market value


“A U.S Treasury bond provides a lower rate of return as compared to a Corporate bond”. Which of the following reason would justify this statement?

►

The U.S Treasury bonds have a low level of risk

►

The Corporate bonds have a low level of risk

►

The U.S Treasury bonds have a high level of risk



►

Corporations have high level of profits


Buying shares in a mutual fund can provide investors with an inexpensive source

of _____________.

►

Investment

►

Diversification

►

Earnings



►

Both 1st and 3rd options are correct


Weights used in calculating the weighted average cost of capital should be based on :

►

Book values

►

Par values

►

Estimated future values



►

Market values


Generally, a firm should try to maximize its overall cost of capital.

►

True

►

False


Capital rationing may lead to non-optimal investment decisions.



►

True

►

False


The expected return of a portfolio is a weighted average of the expected standard deviations of thesecurities in that portfolio.

►

True

►

False




According to Modigliani and Miller, the use of debt is only advantageous in the presence of

corporate income taxes.

►

True

►

False


Security market line represents the relationship between expected return and systematic risk of holding a security.

►



True

►

False

Question No: 16 ( Marks: 5 )

Calculate and compare the effective annual interest rates for BankA and B, if

a)Bank A is offering interest rate of 10% per year, compounded monthly.

b)Bank B is offering interest rate of 8% per year, compounded quarterly.


Following are given the forecasted cash flows( in millions) of two projects:

Year Project A Project B

---------------------------------------------------------0 - 36 -50

1 20 25

2 20 25

3 20 25

If both projects are mutually exclusive, which project should be chosen on the basis of Profitability

Index criteria. Assume a discount rate of 10%.




What is the relationship between market risk of a security and rate of return that investors demand

of that security?


A public limited Company is expected to pay Rs.0.50 per share dividend at the end of the year. Thedividend is expected to grow at a constant rate of 7% per year. The required rate of return on the

stock is 15%. What value per share of the Company’s stock is expected one year from now?

fin622 collection of old papers

Documents