FIN622 Current Midterm Paper Shared by Hijaab

On Sat, Dec 8, 2012 at 9:15 PM, ^*^Aniqa Malik^*^ <shinestar.star86@gmail.com> wrote:

Q---1

Projects

Security X

Security Y

Marks --- 3

Beta

0.8

2

Standard deviation

0.4

0.3

1. Which security is defensive and why?

2. Whish security has greater unsystematic risk and why?

3. Which security requires more risk premium and why?

Q---2

Q---3

Why calculation of common stock is difficult than bonds? Marks --- 3

Expected rate of return on market portfolio 14%

T-bills yield 6%

Expected return (investor) 10%

Calculate Beta of stock=?

Marks --- 3

Q---4

Interest tax shields are valuable, why don't all taxpaying firms borrow as much as

possible. Marks --- 5

Q---5

Marks --- 5

Projects

W

X

Y

Z

1. Calculate NPV.

2. Rank projects according to NPV and calculate total NPV of selected projects.

Initial investment

(50000)

(100000)

(85000)

(96000)

PV of cash flows

65000

120000

113000

105000

Regards

Aniqa Malik

www.vuzs.net

The Coward dies a thousand deaths, 

the Valiant, only once!

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