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SET A
Problem-1.
You are supplied with the following information of ABC company:
Project-A Project-B
Year CFAT C.E Year CFAT C.E
0 3,00,000 1.00 0 4,00,000 1.00
1 1,50,000 .95 1 2,50,000 .90
2 1,50,000 .85 2 2,00,000 .80
3 1,00.0000 .70 3 1,20,000 .70
Which project should be accepted to the company,If risk free discount
rate is 5%.
Problem-2.
XYZ company is considering two mutually exclusive projects.You
are supplied with following information pertaining tot these
projects,advise the company as to which project should should be
taken up by it:
Project-A Project-B
Year CFAT C.E Year CFAT C.E
0 4,00,000 1.00 0 4,00,000 1.00
1 2,50,000 .90 1 3,50,000 .95
2 2,50,000 .80 2 3,00,000 .85
3 1,50.0000 .70 3 2,20,000 .70
Problem-3.
Sar company is considering three mutually exclusive investment
proposals.
Year Proposal-A Proposal-B Proposal-C
0 (5000) (8000)
(7000)
1 2000 2500 2000
2 2000 2000 2500
3 2000 3000 2500
4 2000 2500 3000
5 2000 3000 1500
6 2000 1000 2000
The company employs the RAD approach to evaluate the risky
project and selects the appropriate required rate of return as follows:
Projected payback period Required Rate of Return
Less than 2 Years 5%
1 to 3 years 8%
3 to 5 years 10%
Over 5 year 12%
You are advised to select the best project for the company.
Problem-4.
The probability distribution of NPVs of two projects are given
below.
Project-A Project-B
NPV Probability NPV Probability
Tk 10,000 .2 tk 0 .1
15,000 .7 20,000 .7
25,000 .1 30,000 .2
Calculate :
i) Expected NPV
ii) Standard deviation of NPV
iii) Coefficient of variation of each project.
iv) Which project do you prefer and why?
SET B
Problem-5.
Determined the total return of bond and common stock the following
information:
Bond Stock (nu
exam 05)
Coupon rate =10% Dividend =tk 2
Face value=tk10000 Purchase price=tk 30
Purchase price =tk 960 Sales price = tk 26
Sales price = tk1020 Time period= 1 year
Time period= 1 year No. of shares =100
Problem-6.
Calculate total return and return relatives for the following assets:
(i)A preferred stock bought for tk 70 per share, held one year during
which tk 5 per share dividend are collected. Sold for tk 63.
(ii) A warrant bought for tk 11 and sold 3 month later for tk 13.
(iii)A 12% bond bought for tk 870 for 2 years and sold tk 930.
Problem-7.
Following are the price and other details of 3 stock for the
year2011.Compute TR and RR:(nu exam 05).
Stock Beging price Dividend Ending Price
A 30 3.40 34
B 72 4.70 69
C 140 4.80 146
Problem-7.
Assume that you purchased 100shares of tk 900 per shares and sold
after one year at tk 960 per share and received tk 20 as
dividend.Calculate:
(i) Total return and
(ii) Return relatives
Problem-8.
Mr. X who is the managing director of Purubi Corporation, bought
some stoct from DSE,for tk 150.Exactly one year later he sold it for
tk 175 per share.Mr,X received a cash dividend of tk 10 per share
during the year.You are required to calculate holding period
return(HPR) and holding period yield(HPY).
Problem-9.
Year 2001 2002 2003 2004 2005
Return(R) 7% 3% -9% 6% 10%
Compute:
i) Cumulative Wealth Index ii) Mean (X) iii) Geometric
mean(GM) iii) Standard deviation(SD)
Problem-10.
The shares Hypothetical company limited has the following
anticipated with associated probabilities:
Problem-11.
ACI has the following dividend per share market price per share for
the period 2002-2007:
Year Dividend(tk) AMP(tk)
2002 1.53 31.25
2003 1.53 20.75
2004 1.53 30.88
2005 2 67.00
2006 2 100
2007 3 154
Required:
i) Calculate the annual arte of return
ii) Calculate the expected rate of return
iii) How risky is the share?
Problem-12.
The following information is available for sock x,y,z.
Sock Bear market Normal market Bull market
Stock-x 15% -12% 16%
Stock-y 20% -8% 25%
Stock-z 25% 10% -10%
Probability .4 .3 .3
Required:
i) Calculate the Expected rate of return for each stock.
ii) Calculate the standard deviation for returns on stocks x,y,z.
iii) Assume you invest your tk 50,000 portfolios into a tk 10,000 in
stock x and rest of them equally invest in stock y and z.What is
expected return on your portfolio?
Problem-13.
Return of 2 securities for last five years are given bellow:
Year 1 2 3 4 5
Stock-A 8% 3% 16% -2% 10%
Stock-B 4% 5% 10% -2% 23%
From the information you are required to calculate:
i) Arithmetic mean.
ii) Covariance between securities A and B.
iii) Standard deviation and variance of two stock.
iv) Correlation between stock A and B>
v) Portfolio return and portfolio standard deviation assuming
a) 60%,40% portfolio weight. b) 75%,25% portfolio
weight.
Problem-14.
Two assets A and B have the following risk and return :
E(RA) =16% σA = 20% CorAB =.60
E(RB) =12% σB =26%
Determine the risk and return for a portfolio of asset A and B with
following proportions:
Portfolio Proportion-A Proportion-B
a 70% 30%
b 40% 60%
c 20% 80%
d 65% 35%
Problem-15.
An individual has tk 35000 invested in a stock that has a beta of 0.8
and tk 40,000 invested in a stock with a beta of beta 1.4. If these are
the only two investments in her portfolio, What is her portfolios beta?
Problem-16.
Assume that the rsk free rate is 5% and the market risk premium is
6%.What is the expected return for the overall stock market? What is
the required rate of return on a stock that has a beta of 1.2?
Problem-16.
Assume that the rsk free rate is 6% and the expected return on the
market is 13%. What is the required rate of return on a stock that has
a beta of 0.7?