| Roll No………………… | |
| Total No. of Questions— 6] | [Total No. of Printed Pages—7 |
| Time Allowed : 3 Hours | Maximum Marks : 100 |
| ME | |
| Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued. | |
| Question No. 1 is compulsory. | |
| Answer any four Questions from the rest. | |
| Figures in the margin indicate marks allotted to each question. | |
| Working notes should form part of the answer. | |
| Marks | |
| 1. | (a) | Engineers Ltd. is in the business of manufacturing nut bolts. Some more product lines are being planned to be added to the existing system. The machinery required may be bought or may be taken on lease. The cost of machine is Rs. 20,00,000 having a useful life 5 years with the salvage value of Rs. 4,00,000 (consider short term capital loss/gain for the Income tax). The full purchase value of machine can be financed by bank loan at the rate of 20% interest repayable in five equal instalments falling due at the end of each year. Alternatively, the machine can be procured on a 5 years lease, year-end lease rentals being Rs. 6,00,000 per annum. The Company follows the written down value method of depreciation at the rate of 25 per cent. Company's tax rate is 35 per cent and cost of capital is 14 per cent. | 14 | |||
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| Detailed working notes should be given. | ||||||
| ME | P.T.O. |
( 2 )
| ME | Marks |
| (b) | Determine the risk adjusted net present value of the following projects : | 6 | ||||
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The Company selects the risk-adjusted rate of discount on the basis of the coefficient of variation :
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| 2. | (a) | Sun Moon Mutual Fund (Approved Mutual Fund) sponsored open-ended equity oriented scheme "Chanakya Opportunity Fund". There were three plans viz. 'A' — Dividend Re-investment Plan, 'B' — Bonus Plan & 'C' — Growth Plan. | 12 | |||
At the time of Initial Public Offer on 1-4-1995, Mr. Anand, Mr. Bacchan & Mrs. Charu, three investors invested Rs. 1,00,000 each & chosen 'B', 'C' & 'A' Plan respectively. |
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| ME | Contind... |
( 3 )
| ME | Marks |
The History of the Fund is as follows :
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| On 31st July all three investors redeemed all the balance units. | ||||||||||||||||
| Calculate annual rate of return to each of the investors.
Consider : 1. Long-term Capital Gain is exempt from Income tax. 2. Short-term Capital Gain is subject to 10% Income tax. 3. Security Transaction Tax 0.2 percent only on sale/redemption of units 4. Ignore Education Cess. |
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| (b) | Following information is available in respect of dividend, market price and market condition after one year. | 8 | ||||||||||||||
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| The existing market price of an equity share is Rs. 106 (F.V. Re. 1), which is cum 10% bonus debenture of Rs. 6 each, per share. M/s. X Finance Company Ltd. has offered the buy-back of debentures at face value. | ||||||||||||||||
| Find out the expected return and variability of returns of the equity shares.
And also Advise-Whether to accept buy back offer? |
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| ME | P.T.O. |
( 4 )
| ME | Marks |
| 3 | (a) |
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| (b) | You as a dealer in foreign exchange have the following position in Swiss Francs on 31st October, 2004 : | 7 | |||||||
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What steps would you take, if you are required to maintain a credit Balance of Sw. Fcs. 30,000 in the Nostro A/c and keep as overbought position on Sw. Fcs. 10,000? |
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| (c) | The following information relating to Fortune India Ltd. having two divisions, viz. Pharma Division and Fast Moving Consumer Goods Division (FMCG Division). Paid up share capital of Fortune India Ltd. is consisting of 3,000 Lakhs equity shares of Re. 1 each. Fortune India Ltd. decided to de-merge Pharma Division as Fortune Pharma Ltd. w.e.f. 1-4-2005. Details of Fortune India Ltd. as on 31-3-2005 and of Fortune Pharma Ltd. as on 1-4-2005 are given below : | 8 | |||||||
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| ME | Contind... |
( 5 )
| ME | Marks |
Board of Directors of the Company have decided to issue necessary equity shares of Fortune Pharma Ltd. of Re. 1 each, without any consideration to the shareholders of Fortune India Ltd. For that purpose following points are to be considered :
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Calculate :
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| 4. | (a) | What are the investors' rights & obligations under the Mutual Fund Regulations? Explain different methods for evaluating the performance of Mutual Fund. | 8 | |||||||
| (b) | The Investment portfolio of a bank is as follows : | 8 | ||||||||
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| Face value of total Investment is Rs. 5 crores in each Government Bond.
Calculate actual Investment in portfolio. |
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| What is a suitable action to churn out investment portfolio in the following scenario?
1. Interest rates are expected to lower by 25 basis points 2. Interest rates are expected to raise by 75 basis points |
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| Also calculate the revised duration of investment portfolio in each scenario. | ||||||||||
| ME | P.T.O. |
( 6 )
| ME | Marks |
| (c) | You sold Hong Kong Dollar 1,00,00,000 value spot to your customer at Rs. 5.70 & covered yourself in London market on the same day, when the exchange rates were | 4 | |||||||||||||||
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| Calculate cover rate & ascertain the profit or loss in the transaction ignore brokerage. | |||||||||||||||||
| 5. | (a) | The following data are available for a bond | 8 | ||||||||||||||
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What is the current market price, duration and volatility of this bond? Calculate the expected market price, if increase in required yield by 75 basis points. |
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| (b) | Explain the terms ESOS and ESPS with reference to the SEBI guidelines for The Employees Stock Option Plans (ESOPs). | 4 | |||||||||||||||
| (c) | Your client is holding the following securities : | 8 | |||||||||||||||
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Average return of the portfolio is 15.7%, calculate :
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| ME | Contind... |
( 7 )
| ME | Marks |
| 6. | (a) | What is Securitisation? What are its various instruments? | 5 |
| (b) | M/s. Transindia Ltd. is contemplating calling Rs. 3 crores of 30 year's, Rs. 1,000 bond issued 5 years ago with a coupon interest rate of 14 percent. The bonds have a call price of Rs. 1,140 and had initially collected proceeds of Rs. 2.91 crores due to a discount of Rs. 30 per bond. The initial floating cost was Rs. 3,60,000. The Company intends to sell Rs. 3 crores of 12 per cent coupon rate, 25 years bonds to raise funds for retiring the old bonds. It proposes to sell the new bonds at their par value of Rs. 1,000. The estimated floatation cost is Rs. 4,00,000. The company is paying 40% tax and its after cost of debt is 8 per cent. As the new bonds must first be sold and their proceeds, then used to retire old bonds, the company expects a two months period of overlapping interest during which interest must be paid on both the old and new bonds. What is the feasibility of refunding bonds? | 10 | |
| (c) | Write a brief note on external Commercial borrowings. | 5 |
| ME |