Fin622 Fall 2011 Final Term Feb 2012 – VU Current Paper – 08 Feb 2012

About 50% Mcqz wz frm past papers others wz new
subjective:
Re-organize of capital structure (3 marks)

How firms analyze their credit policies? Explain briefly. (3 marks

How Short-Term Interest rate future are Priced? Explain With help of Some Examples? (3 Marks)

Differentiate between the Forward Contract and Currency Future. 5 marks

Analyze credit policies and explain these
1. Policy collection
2. Credit period
3. Discount
4. Credit standardization (5 marks)

A borrower borrows an amount of 100,000 and a expected rate of inflation is 5%.
a. Calculate the real rate of return of the borrower.
b. If the inflation rate increases to 8% then who suffer borrower or lender ? 5 marks

An investor buys 5 options on shares at a price of Rs 50 per share. Each option consists of 100 shares and premium paid is Rs. 2 per share. What would be the

net gain, total cost of option and total gain for investor if the share price is Rs. 55 at the expiry of option? (5 marks)
Sol:
Total share is 5 *100 =500
Total cost of option is 500*52=26,000
Total Sale Value = 500 * 55 = 27500
Net Gain = 27500 – 26000= 1500

 

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