This Paper has

**20**answerable questions with**0**answered.Roll No……… | |

Total No. of Questions — 7] | [Total No. of Printed Pages — 8 |

Time Allowed : 3 Hours | Maximum Marks : 100 |

Question No. 1 is compulsory. |

Answer any five questions from the rest. |

Working notes should form part of the answer. |

Marks |

1. | (a) | Mr. Tamarind intends to invest in equity shares of a company the value of which depends upon various parameters as mentioned below:
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(b) | The current market price of an equity share of Penchant Ltd is Rs. 420. Within a period of 3 months, the maximum and minimum price of it is expected to be Rs. 500 and Rs. 400 respectively. If the risk free rate of interest be 8% p.a., what should be the value of a 3 months Call option under the "Risk Neutral" method at the strike rate of Rs.450 ? Given e^{0.02} = 1.0202. | 5 | (0) | |||||||||||||||||||||||||||||||||

(c) | A Mutual Fund is holding the following assets in Rs. Crores :
The Beta of the portfolio is 1.1. The index future is selling at 4300 level. The Fund Manager apprehends that the index will fall at the most by 10%. How many index futures he should short for perfect hedging so that the portfolio beta is reduced to 1.00 ? One index future consists of 50 units. | 5 | (0) | |||||||||||||||||||||||||||||||||

(d) | Mr. Tempest has the following portfolio of four shares:
Required. (i) Determine the portfolio return. (ii) Calculate the portfolio Beta. | 5 | (0) | |||||||||||||||||||||||||||||||||

2. | (a) | X Ltd. had only one water pollution control machine in this type of block of asset with no book value under the provisions of the Income Tax Act, 1961 as it was subject to rate of depreciation of 100% in the very first year of installation.
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(b) | A Inc. and B Inc. intend to borrow $200,000 and $200,000 in ¥ respectively for a time horizon of one year. The prevalent interest rates are as follows :
They entered in a currency swap under which it is agreed that B Inc will pay A Inc @ 1% over the ¥ Loan interest rate which the later will have to pay as a result of the agreed currency swap whereas A Inc will reimburse interest to B Inc only to the extent of 9%. Keeping the exchange rate invariant, quantify the opportunity gain or loss component of the ultimate outcome, resulting from the designed currency swap. | 8 | (0) | |||||||||||||||||||||||||||||||||

3. | (a) | Abhiman Ltd. is a subsidiary of Janam Ltd. and is acquiring Swabhiman Ltd. which is also a subsidiary of Janam Ltd. The following information is given :
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(b) | Jumble Consultancy Group has determined relative utilities of cash flows of two forthcoming projects of its client company as follows :
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4. | (a) | Shares of Voyage Ltd. are being quoted at a price–earning ratio of 8 times. The company retains 45% of its earnings which are Rs. 5 per share. You are required to compute
| 3+3+2 | (0) | ||||||||||||||||||||||||||||||||

(b) | An investor purchased 300 units of a Mutual Fund at Rs. 12.25 per unit on 31st December, 2009. As on 31st December, 2010 he has received Rs. 1.25 as dividend and Rs. 1.00 as capital gains distribution per unit. Required :
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5. | (a) | Simple Ltd. and Dimple Ltd. are planning to merge. The total value of the companies are dependent on the fluctuating business conditions. The following information is given for the total value (debt + equity) structure of each of the two companies.
Calculate the expected value of debt and equity separately for the merged entity. | 8 | (0) | ||||||||||||||||||||||||||||||||

(b) | Tender Ltd has earned a net profit of Rs. 15 lacs after tax at 30%. Interest cost charged by financial institutions was Rs. 10 lacs. The invested capital is Rs. 95 lacs of which 55% is debt. The company maintains a weighted average cost of capital of 13%. Required,
| 8 | (0) | |||||||||||||||||||||||||||||||||

6. | (a) | The following information is given for QB Ltd.
(i) Gordons formula (ii) Walters formula | 8 | (0) | ||||||||||||||||||||||||||||||||

(b) | (i) | Mention the functions of a stock exchange. | 4+4=8 | (0) | ||||||||||||||||||||||||||||||||

(ii) | Mention the various techniques used in economic analysis. | (0) | ||||||||||||||||||||||||||||||||||

7. | Answer any four from the following: | 4x4=16 | ||||||||||||||||||||||||||||||||||

(a) | Explain the significance of LIBOR in international financial transactions. | (0) | ||||||||||||||||||||||||||||||||||

(b) | Discuss how the risk associated with securities is effected by Government policy. | (0) | ||||||||||||||||||||||||||||||||||

(c) | What is the meaning of:
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(d) | What is the significance of an underlying in relation to a derivative instrument? | (0) | ||||||||||||||||||||||||||||||||||

(e) | What are the steps for simulation analysis? | (0) |