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MGT201 ALL Current Mid Term Papers Fall 2014 & Past Mid Term Papers at One Place from 10 January 2015 to 25 January 2015

MGT201 ALL Current Mid Term Papers Fall 2014 & Past Mid Term Papers at One Place from 10 January 2015 to 25 January 2015

 

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yar koi helping material tu do jin sy past paper aya tha? admin? 

Share Your Current mid Term Papers (Questions/Pattern) from 20 December 2014 to 01 January 201 to help each other. Thanks 

kindly share

Total Marks = 39 ( 19 Marks for MCQs + 16 Marks for Subjective )

50% past paper walay MCQs thay aur subjective main

1. What are the benefits enjoyed by Common Shareholders over Preferred Shareholders? ( 3 Marks )

Aik aur subjective tha

Aur baqi numericals thay.

Adeel Baig thanks 

Attention Students: You don’t need to go any other site for current papers pattern & questions. Because all sharing data related to current Mid term papers of our members are going from here to other sites. You can judge this at other sites yourself. So don’t waste your precious time with different links. Just keep visiting http://vustudents.ning.com/ for all latest updates.

short notes ,formulas and mid term papers 

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past papers

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Current Solved Subjective Questions – MGT 201

Financial Management

 

 

  1. Suppose there are 2 stocks in your investment portfolio,

 

Value of investment

Expected IRR

A

40

30

B

60

20

Total

100

 

 Calculate the expected portfolio return

Solution:

Expected Portfolio return calculation:

rP = rA x A + rB x B

rP = 30% x (40 / 100) + 20% x (60 / 100)

rP = 0.12 + 0.12

rP = 0.24 or 24%

 

 

  1. You want to start your business so you approach a bank. The bank offers you to lend you Rs. 100000 and you sign a bond paper. The bank asks you to issue a bond in their favor on the following requirement by bank.

Par value = Rs, 100000

Maturity = 2 years

Coupon rate = 12% Mark up paid at the end of each year

For the bank

What is the value of investing in a bond with that bank has opportunity cost of 10%.

Solution:

Cash flow = coupon value = par value x coupon rate

                                              = 100,000 x 12%

                                                  = 12000

So,

PV = 12000 / 1.1 + 12000 / (1.1)2  +100000 /(1.1)2                                          

PV = 103471

  1. Why does diversification reduce risk?

Diversification is a technique that reduces risk by investing among various financial instruments, industries and other categories. It aims to increase return by investing indifferent areas. Make sure that they are uncorrelated so that they don’t suffer from the same bad news.

Diversification states “Don’t put all your eggs in one basket”

  1. What are the effects of changes in macro interest rates on the portfolios of the bonds?

Changes in Market / Macro interest rates have two major impacts on portfolio of bonds:

  1. Interest rate risk:

In this, value of bond portfolio drops when interest rates rise.

  1. Reinvestment risk:

In this, overall rate of return on bond portfolio rises when interest rates rises the opportunity cost for the bond holder has changed.

  1. Why should you invest in shares? Give reason.

Invest in share is better than any other form of investment due to following reasons.

Easy to sale.

Easy to purchase.

Limited liability

No risk

  1. Why companies prefer debt on equity to raise funds?

Debt financing refers to any borrowed money which the entrepreneur must pay back to the lending institution. An interest rate and other terms apply. Company which are well established and profitable growth often rely on debt financing.

Equity financing is money lent in exchange for ownership in a company. New businesses can use equity financing for their startups or when they need to raise additional equity capital to offset existing debt.

  1. Calculate YTM? (Page 72)

http://www.ehow.com/way_5349598_formula-yield-maturity.html

 

  1. Two approaches for life span of different life span of two different projects. Discuss any one. (5 marks)

Page 54 to 57

  1. Common life approach.                        vuzs

This procedure extends one or both projects until an equal life is achieved. For example project A has 6-year life and project B has 3-year life. Under this approach, the project would be extended to a common life of six years. Project B would have an adjusted NPV equal to NPVB plus NPVB discounted for three years at project’s cost of capital. Then the project with the higher NPV would be chosen.

 

  1. Perpetual investment for preferred stock. (Marks 5)

Preferred share holders get a preference over common shareholders in recovering their money if the company goes bankrupt. Although preferred shareholders are owners they may not get voting rights. It is also known as hybrid equity. As it is mix of bonds and share. Preferred shareholders receive a fixed regular dividend.

Perpetual investmentmeans you are considering buying this stock and keeping it forever.

PV = DIV1/rPE

Where r PE = Minimum Required Rate of Return on Preferred Stock Equity for the individual investor

PV = Present Market Value (or Estimated Present Price) which depends on

 DIV 1 = Forecasted Future Dividend in the next period

 

  1. Coefficient question. (5 marks)              vuzs

Page 89

  1. How two distributions are compared in the market?

 

  1. What type of shares available in the market?

The shares which are issued by companies are of two types

  1. Equity Shares
  2. Preference Shares

Equity Shares areissued and are traded everyday in the stock market. The returns on the equity shares are notat all fixed. It depends on the amount of profits made by the company. The board of directorsdecides on how much of the dividends will be given to equity share holders. Share holders canaccept to it or reject the offer during the annual general meeting.

Preference shares are market instrument issued by thecompanies to raise the capital. Preference shares have the characteristics of both equityshares and debentures.

  1.  How negative correlations behave in market?
  2. In efficient markets where investors have almost equal information, fair value will basically match market price but temporarily they can differ. Than what happens.
  3.  Explain the impact of interest rate on long term and short term bonds?

Interest Rate Risk for Long Term Bonds (i.e. 10 year bonds) is more than the Interest Rate Risk for Short Term Bonds (i.e. 1 year bonds) provided the coupon rate for the bonds is similar. When investor buy a long term bond he is locked in investment for long term period there are more chances of fluctuation in interest rate and the inflation rate. So, the impact of interest rate changes on Long Term bonds is greater. Long Term Bond Prices fluctuate more than short term bonds because their Coupon Rates are fixed (or locked) for a long time even though Market Interest Rates are fluctuating daily.

  1. H corporation's stock currently sells for 20 a share the stock just paid a dividend of Rs 2 a share (Do=Rs 2) the dividend is expected to grow at a constant rate of 11% a year

a) What stock price is expected one year from now?

b) What would be the required rate of return on company's stock?

Page 86

 

 

  1. What do you mean by yield to maturity (YTM) of a bond? Explain briefly.

Yield to maturity is actually an estimation of future return, as the rate at which coupon payments can be reinvested when received is unknown. It enables investors to compare the merits of different financial instruments.

  1. Explain briefly the Constant Growth Dividends Model of common stocks valuation.

The Gordon growth model is a variant of the discounted cash flowmodel, a method for valuing a stock or business. Often used to provide difficult-to-resolve valuation issues for litigation, tax planning, and business transactions

  1. H Corporation’s stock currently sells for Rs.20 a share. The stock just paid a dividend of Rs.2 a share (Do = Rs.2). The dividend is expected to grow at a constant rate of 11% a year.  What stock price is expected 1 year from now?  What would be the required rate of return on company’s stock?

 Formula:

P0 = Div + P1 / (1 + r)

  1. What is the definition of Call provision? 3 Marks

The right of the Issuer to call back or retire the bond by paying-off the Bondholders before the maturity Date. When market interest rates drop, Borrowers often call back the old bonds and issue new ones at lower interest rates.

  1.  A security analyst has estimated the following returns on the stocks of 4 large companies:

company

Weight age

Expected Returns

A

25%

12%

B

25%

11.50%

C

25%

10%

D

25%

9.50%

You are required to calculate the expected return on this portfolio.3 Marks

Formula:

       Portfolio Expected ROR Formula:

rP * = r1 x1 + r2 x2 + r3 x3 + …+ rn xn

Solution:

rP = (25% x 12%) + (25% x 11.5%) + (25% x 10% )+(25% x 9.5%)

25.  What are the types of bond? (Any five) 5 Marks.

Mortgage Bonds: backed & secured by real assets

Subordinated Debt and General Credit: lower rank and claim than Mortgage Bonds.

Debentures: These are not secured by real property, risky

Eurobonds: it issued from a foreign country.

 Corporate bonds: are sold by the representative bank.

 Junk bondsor high yield bonds: are bonds from risky companies, so therefore they offer higher interest rates to compensate for the risk.

Municipal bonds:  are issued by various cities. These are tax free, but have slightly lower interest rate
26. Define the Diversifiable Risk and Market Risk and Causes of Risk. 5 Marks
Diversifiable Risk
: random risk specific to one company, can be virtually eliminated.

Market Risk: It is defined as uncertainty caused by broad movement in market or economy.

Causes of Risk:

These can be Company-Specific or General. It may be because of Cash Losses from operations or poor financial management of the company. This is one possibility but the real question is that why these losses occurred. One of the reasons for the losses might be the company’s Debt, Inflation, Economy, Politics, War or Fate. Final analysis of risk is that it is a game of fate or chance

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My todays Complete  paper 18 jan -2015 ALHUMDULILLAH :

Please solve it your self guys !!!

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+AwaiS The Dark Prince  thanks for sharing 

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