Fundamentals of Investment (FIN-253)

Tribhuvan University · Fundamentals of Investment (BBS 4th Year) · 2082 BS — 19 questions — a free old question paper on Goodone.club’s exam-paper archive.

  1. What are steps in investing? [2 marks]
  2. Differentiate between initial margin and maintenance margin. [2 marks]
  3. What is the role of stock broker? [2 marks]
  4. What is call option? [2 marks]
  5. How does stock broker differ from stock dealer? [2 marks]
  6. What are the major sources of risks? [2 marks]
  7. Suppose you have 500 shares of XYZ Company and currently selling at Rs. 2,000 per share. What would happen to the number of shares and market price after 5 percent stock dividend? [2 marks]
  8. What do you mean by convertible securities? [2 marks]
  9. The net assets value of an open-end fund is Rs. 20 per share. What would be the offering price if fund's front-end load fee is 4 percent? [2 marks]
  10. Suppose risk free rate is 5 percent, market risk premium is 7 percent, what is expected market return? What would be required rate of return of stock Alpha with its beta coefficient of 1.10? [2 marks]
  11. What is investment? Describe the types and sources of investment information in Nepalese perspective. [2+8] [10 marks]
  12. Sushil purchased 1,000 shares of National Insurance Company stock on margin at the beginning of the year for Rs. 200 per share. Initial margin requirement was 50%. Sushil paid 10% interest on the margin loan and never faced a margin call. National Insurance paid dividends of Rs.10 per share during the year. a. At the end of year, if Sushil sold National Insurance stock for Rs. 300 per share, what would Sushil's rate of return be for the year? b. At the end of year, if Sushil sold stock for Rs.150 per share, what would Sushil's rate of return be for the year? c. Recalculate your answers to part... [10 marks]
  13. Current dividend of Daunne Company (DC) stock is Rs 20 per share. Required rate of return on stock is 15 percent. The current market price of stock is Rs. 200 per share. a. What is growth rate of earnings of Daunne Company? b. What would be present value of stock if growth rate is 10 percent per year forever? c. Suppose growth rates of dividends are 20 percent for the first three years, 10 percent for next one year and 5 percent thereafter. What would be the price of stock at end of fourth year? What would be the present value of stock? [2.5+2.5+5] [10 marks]
  14. The composition and information of number of shares and prices of Lumbini Fund Portfolio are given below (Stocks | Shares | Price (Rs.)): A | 2,000 | 110; B | 3,000 | 120; C | 4,000 | 130; D | 5,000 | 140. The fund has accrued management fee obligation of Rs. 200,000. There are 100,000 shares outstanding. a. What is net assets value of the Lumbini fund? b. What is percentage of premium or discount if the fund is currently selling in the market at Rs. 20 per share? c. Suppose you purchased Lumbini fund at Rs. 19.20 per share, your plan is to hold it for one year. What would be your holding peri... [10 marks]
  15. Consider the following information for securities of three companies (Year | Market Price (Rs.) Alpha/Beta/Delta | Number of shares outstanding Alpha/Beta/Delta): 2022 | 15 40 35 | 1000 3000 2000; 2023 | 9 45 30 | 3000 3000 2000; 2024 | 10 50 40 | 3000 3000 3000. There has been 2-for-1 stock split of Alpha stock at the end of year 2022. a. Determine price weighted index for each year using 2022 as the base year. b. Determine value weighted index for each year using base value of 100. c. What is the return for stock for 2023 and 2024 based on the price weighted and value weighted index? [4+3+3] [10 marks]
  16. (a) Suppose Ambika is holding a put option on NABIL stock that gives the right to sell 100 shares at Rs. 500 a share at the end of three months. What is the value of option if price of NABIL stock falls Rs. 450 per share in the market? What is the gain (loss) for Ambika if put premium is Rs. 10 per option? [5] (b) Describe Sharpe's measures and Treynor's measures of portfolio performance. [5] [10 marks]
  17. Explain about the current investment environment in Nepal. [15 marks]
  18. Consider the following probability distribution and returns of stock Alpha and stock Beta (State of Economy | Probability | Return of stock Alpha (%) | Return of stock Beta (%)): First | 0.30 | 10 | 25; Second | 0.40 | 20 | 20; Third | 0.30 | 30 | 15. a. What are the expected returns and standard deviations of Stock Alpha and Stock Beta? b. Which stock would you prefer to invest? Why? c. Calculate correlation coefficient between returns of stock Alpha and Beta. d. If you form a portfolio with investment of your 70 percent funds in stock Alpha and 30 percent funds in stock Beta, calculate the y... [15 marks]
  19. A 9 percent coupon bond of Rs. 1,000 par has 10 years maturity. The bond is currently trading at Rs. 1020 per bond in the market. Assume coupon of the bond is paid annually. a. What is the yield to maturity of the bond? b. What is the current yield rate of the bond? c. Calculate the capital gain/loss of the bond. d. What would be the yield to call of the bond if it is callable at Rs. 1,050 per bond at the end of the fifth year? [5+2.5+2.5+5] [15 marks]