ull FACULTY (AGEMENT — Office of the Dean —_ April 2019 BBA / Seventh Semester / BNK 204: Investment Analysis Ge Candidates are required to answer all he questions in their own words as Jar as practicable. Group “A Brief answer questions: Indicate whether the following statement are D Acotege education area assets, Hox 1-10) “Truc” or “False”. Support your answer with reason, 2. Transaction costs are quite nominal for bonds than stocks. > A marsn call occurs anytime the equity position of the margin account falls below the initial margin 4 pod ace Hm one Wigner of he ta ane Gu period Crore) =e oa %. Calculate the rate of retum on a price wei ighted index of the three stocks. ; w Period (t= 0 to t=1), ae <.__Riekm pee othe dort ric weighed inca & Ceuta fren forte weaned eran Calculate the frst period rat ts of return cn the fll lowing indexes of the three stocks: . ‘A market value weighted index . H. An equally weighted index.13. Suppose that you sell sh ‘ort 500 shares of Intel, currently selling for Rs 40 per share, Your broker Rs 15,000 to establish your margin account. If you eam no interest on the funds in y Fetum after one year if Intel stock is sll that Intel pays no dividends. % Ifthe maintenance margin is 25%, how high ean Intel's price rise before you get a margin call? E ad four margin account, what will be your rate ing at: (i) Rs 4; (ii) Rs 405 (ii) Rs 36? Assume © Redo parts (a) and (b), but now assume that Intel also as paid a year-end i idend of Re 1 per share, Beity ‘The composition ofthe Nepal Mutual Fund Fortfolio on Ist January 2018 Was as follows: Shares Price L 200,000 Rs 35 300,000 Rs 40 ZT fund has management fee with the portfolio manager currently totals Rs 30,000, There are 4 million shares outstanding. 4 elole|> tf 400,000 Rs 20 600,000 Rs 25 ‘What was the net asset value of the fi onan 2082 art eke nectar ne x b. Af during the year the portfolio manager sells all of the bol ‘ith 200,000 shares of stock Eat Re 50 per share and are of stock F at RS 25, Ber share, what i the prtfolio'stamover Folio tumover rte signity? ‘equaled Rs 12.10, a _By sate tig Re 1210. The fund paid yearend k D and replaces it A asain e fog Eixcrrouic COporation has 1.25, and plans to maintain indefinitely ‘were Rs 3 per share. The annual dividend year's market return is 14%, and T-bills eu (, b. Caleulate the PIE ratio, ¢. Calculate the present value of growth opportuni 16. A newly issued bond pays its coupons once annually. Its ‘ears, and its yield to maturity is 8%. im for 1-year investment ‘a. Find the holding-period retu yield to maturity of 7% by the end ofthe year Ifyou sel the bond after year, wa tases will ou owe is 40% and the tax rate on capital ‘What is the after-tax holding-period retum on the bond? nt al oe a tn? yc 4. Find he rained compo en) he ond yo ea te Sa 1 Gye coupon can be reinvested for year ata 3% interest rate. f2.$ ‘and (iii) the coupon canNs ‘ e — 1 tc tne Fo. 2x 10-20 Consider the following table, which gives a security analyst's expected return on two stocks for ‘two particular market returns: [Market return’ % 20 Agaressive stock’s return | Defensive stock's return 7m a a% 32 14 j 7 Wat a as oe no? ‘What is the expected rate of return on each stock ifthe market return is equally likely to be 59% oF 20%? If the T-bill rate is 8%, and the market return is equally likely to be 5% or 20%6, draw the 'SML for this economy. Plot the two securities on the SML graph. What are the alphas of each? ‘What hurdle rate should be used by the management of the agaressive firm for a project with the risk characteristics of the defensive firm's stock? ‘A pension fund manager is considering three mutual finde The firet is a dock fund (S), the sp second is a bond fund (B), and the third is a T-bill money market fund that yields a sure rate of Standard deviation— +TRIBHUVAN UNIVERSITY isl FACULTY OF MANAGEMENT nf Office of the Dean ese a Aprit2019 SEE |__BBA / Seventh Semester / MGT 209: Business Ethies and Social Responsibi Candidates are i tear reguired oie hele amor in thrown words far pracicable Brief Answer Questions: Sreanig Define business ethics, Define code of conduets, MWoxt Do you think gi giving is unethical in business? Whats money laundering? What is meant by exploitative nature of advertising? ‘Whats uta? Nests unchical behavior. ‘What doy ko abut ical casmption? Point out any four responstilies of financial insur, 10. Write down any two etal sus in Nepalese busines organization, ms a Ss Group B” Shot ae ROR ~ 11. Explain the myths about business ethics 12, Discuss the pros and cons of office romance © ‘Caigicalfy examine the moral positivism of Thomas Hobbes. Va Mit ee tical noms at a 0 ces in prot psoning ad 15. Discuss the major driving fores of CSR 16, Explain the various CSR problems and prospect in Nepal Group °c” Comprehensive answer questions Wax 520) 17. Read the following case carefully and answer the questions that follow In the world of modernization, innovation, rapid development and dynamism, people are ‘not fimited to textbooks, lectures and theories. People, students, academician need 10 have exposure in practical and rapid changing world, As a student who is enrolled in sanious colleges affiliated with various universities need to complete the credit hours along with assignments, projects. presentation, group work and many moreAmong all these curriculum work, undergraduate and graduate level through internship, » internship has also been a vital part for students at to get real life exposure of work environment. It is students can implement their theoretical knowledge in practical life. Sarah is a management student from ABC institute MBA degree. Being a second year student who ne she had applied for intermship in one of the leading advertising agency of the country. Well positioned ad company was one of the leading companies among the ad leaders, the total employee which add the cost to company accounts to 25% as of the date. Initial few days of her work, she was given proper guidance, supervision and instructions to learn and explore herself. Sarch was being able to cope up and adjust in the working environment as an intem and was really enthusiastic about her work. After a month of her internship, where she leamed some corporate tactics, her supervisor cals her and told her, "Sarah, look we are one of the leading advertising agency of the county, We should always think ahead of the competitors. So, we have thought of you as one of the potential employee for our company in the near future. We are also expecting certain work from you. What we are expecting from you is that, you need to visit 2 Various ad agencies and as a student you need to ask them various information ns project for your studies which can be helpful for our company to know their strategy and gain competitive advantage over our competitors.” \ ‘The supervisor requested her to capture the core customer profiles, customize pricing and ‘their internal management to ‘overcome the high overhead cost. The supervisor also attracts her for hiring long-term employee im ‘ Questions: a How genuine is the decision of supervisor to allot intem for capturing ‘competitor's data rather than selecting his own employees? a b. Isthead th/way to collect the information fair? Why or wh rarer ortit? Why or why. gota. I 4. After analyzing the case, did you notice any sex the statement. ' Sexual harassment with Sarah, Justify of management who is pursuing her eds to do internship in her last semester Seca’n Group “A” Brief answer questions: - 0x 1=10) Indicate whether the following statements af@"True” or “False”. Support your answer with reason. A firm adopting a conservative worki pital financing approach uses more short-term sourees of financing —_—_ 2 Ifa firm’s inventory turnover is 9 tif, receivable conversion period is 30 days and bevabe deferral period is 35 days then operating cycle is 45 days (Assume 360 days in ay 3 Shore sources of financing are lfenstly in comparison to the long-term sources of 4. Cost of warehouse financing is segurd§|short-erm sources of working capital financing for a business firm. 5. A firm should follow relax collet y fo minimize the size of receivables and of carrying receivabler apm 6. A firm has goods-in-transit when its oM frequency is less than delivery period of 00ds, 7. ‘The effective annual interest rate on Jishount interest bank loan is always higher than simple interest bank loan. 8. Chabahil Distributer Company (CDC) fas total assets of Rs 10 million, If the CDC ‘maintains Rs 4 million of curren cand uses KS & million long-term sources of financing which indicates CDC's workingeaptal requirement of Rs milion. 9, A firm with disbursement float of Rs 100000 and collection float of Rs $0,000 results its net float of Rs 20,000. 10. Credit standards, credit terms and llection policy are the major components of receivables management ofa firm Goup “Bm Short answer questions: 16x 5=30 jase (PMH) is a Metal Ho Panchakanya Metal fer to spe 30° 10 3/10, net 30" in od idfaul customers take the esieing changing its ret terms fom “2/15, net tions. At present, 40 percent of PM's on: liscoun. Under the new nor delagea 8 terms discount estes are expec «100 do 101 HE dicount ae ee: Regardless of credit tems, half of the ae 0 days Ite he change docs pot o pay on time, wheres fe remainder wil ad debt ISR MO exDcted to rise ee oe ion oF ered ‘Standards: therefore, b ' rise above their present 2 percentlevel. However, th from Rs 2 million to Rs 2 6mm interest rate on fa ee tax rate is 40 percent, meted ncn iscount terms are expected t incre PMIt's variable cost ratio is 75 perce -ceivable is 9 percent, and the firm's mary he more generous 8 What is the incremental prot b. Should PMH change its credit the change in credit terms? 12. Alpha Company ny Pays accounts pay the company is 40 days-and inven Rs 36,000,000 on operating ove Percent. Assume a 360 day's year an to stretch its accounts payable by 5 days. ity realize from the new plan? }DMC) is negotiating with Nepal Bank Limited k has offered GDMC the following three ©. If the company is considerin, ‘What annual savings can the ® Gorkha Dolls Manufacturing Company for one year loan of Rs 200,000, alternatives: 4 A 15 percent interest rate, no pensating balance, and interest due at the end of the year. b. -AUL3 percent interest rate, a 2 ‘compensating balance, and interest due at the © Anil terest rate, a compensating balance, and the loan is Sx discounted, es icalis ive wont GbR 14. HP Manufacturing (HPM) requires 1,000, price is Rs 100 per unit. Ordering cost is Rs 400 which in per order and carrying cost is 8 percent. Sey stock is 40,000 uni days. The order size should be multiples of 1000. Assume 360 days in a ye a Whatis economic order quantity? +« b. What would be HPM's re-order poin’? If supplier offers 1 percent quantity discount if HPM’s order size is doubled, * should discount offer be accepted? & The Himchuli Furniture Company (FC) is considering factoring its receivable. The average level of receivables is Rs 4,000,000 and its average collection period is 70 days. HFC’s bad-debt losses average Rs 90,000 per month. (Assume 30 days per. month). Factoring receivables will save the company Rs 3,000 per month through the elimination of its eredit department. The factor charges a 2 percent commission and requires a 10 percent reserve for returns and allowaticgs. HFC can borrow funds from the factor at 3 percentage points over prime rate, which] currently 9 percent, determine the amount of usable funds that HFC can obtain by factoring its receivables. Calculate the annual financing cost of factoring receivables, 16. What is working capital management?) Explain various working capital financing approaches?“cr Comprehensive answer questions: [2x 10=20] 17. (a) What is cash budget? How ired? Explain. (b) Butwal Technical Instituti contemplating installation 40,000 per month. The init time by 4 days and cheques day, has an annual opportunity cost of 9 percent x system. The cost of lockbox system is Rs lockbox system is expected to reduce mailing time by 2 day. If BTI collects Rs 1,000,000 per a. What is the total annual b. What is the annual benefit c. Should BTI initiate the | 18. Mechi Automobile Company (MAC mpting to determine the optimal level of current assets for the coming fanagement expects sales to. increase to approximately Rs 2 million because offah asset expansion presently being undertaken. Fixed assets total Rs I million and MA@¥Wishes to maintain a 40 percent debt ratio. The MAC's interest cost is currently 8 percent on short-term and 10 percent on long-term debt. Three alternatives regarding the projecred current assets level are 40 percent, 50 percent 60 percent of projected sales for tight policy, moderate policy and relaxed policy respectively. The MAC expects to gerferate eamings before interest and tax at a rate of 12 percent on total sales. Assume a 20 pfree = a. What are expected return on ch current asset policy?BBA / Seventh Semester / __ Candidates are required 10 answer: Brief Answer Questions: , Indicate whether the following statements are true or false. Support your answer with ressons. 1, Eurodbotiar deposits ean only be made at banks located in Europe. 2 As the risk of financial security increases, the quantity of loanable fund supply falls and hence interest rate increases. © 7 Yield on callable bond always exceeds @ RB requires all commercial banks @ @ ‘A bank expecting increasing interest should apply floating rats to loans wh Ifprojected rate of return on pension underfunded, 7. Buying large blocks of securities and isan example of pure arbitrage. \p © Sele 100,000 with cash, the CAR declines. to buy and sell securities in only the primary 9. When a bank repurchases its common stock 10, Securities firms are those firms that help i markets Gri Short Answer Questions: 16x 5=30] 11, Discuss any three tools the central bank uses the money supply in the nation. 12, (@) Suppose the following rates. _ Rumors Sve [Current one year rate |Current two year rate $ pcs Expected one year rate in If the liquidity premium theory of th Oflinterest rates holds, what i the liquidity premium for year 2? (6) An insurance company’s proeted ratio is 12.9 percent It estiates ta tad another 16 percent. What isthe a positive operating ratio? . Bank A is facing the liquidity ble, greoment The requed reserve 0 o ‘a. What is the total demand depo* ¥ system? _ What isthe money muttile” 77.5 percent and its loss adj -xpense sjustment ay ents and dividends to policyholders will ‘eld on investment required in order to|maintain Bank lent Rs 5 million under repurchase' ka @ & What willbe the new level oF M1 ithe M4. Aaradhana i oking wT : res bil daa pe Aiseount eld of 638 percent on a 5 Conse bond paying coupon is ob $5 prayer The oe ae 16. Consider a mutual fund with Rs 200 million i ‘shares outstanding. The fund invests in a portfolio 8 increase in price by 8¥&: 5 sadettege fart as i Beto ccs tae rae eine ee ee of | percent, which are deducted from portfolié assets at year-end. What is net assets value at the ‘start and end of the year’? What is the rate of retum for an investor in the fund’? coupe irene st 17. (@) An investment bank agrees to underwrite a Rs 500 million, 10 year, 8 percent semiannual bond issue for Goldstar Corporation on a frm commitment basis. The investment bank pays Goldstar on Thursday and plans to begin a public sale on Friday. What type of interest rate movement does the investment bank fear while holding these securities? If interest rates rise by 0.10 deposits in 2074 B.S are Rs 16,053.4 maillion and Rs. ‘bank's net interest income and interest spread? jing information on a particular day for the purpose [Amount in Rs | 10,645,599,000, 1,718,454,020 4,785,059,440 2.735.025.645, 1,085,714.283 129,199,207 | (61,864268 (246,448,600) 394,000)Market risk details Claims on government & centr Claims on other o Claims on banks 1,182,822,269 Se are9.602,920 EF TR 3,408 55F FO Operational risk details. Particulars Fiscal Year 2071072 20721073 2073/074 Net interest ineome 4,020,913,396 | | -4,976,173,411 | Commission and dicount incone_|| 1,019,925,141 | 1,343,245,687 theperiod ep psp 4 — 77,751313| 125,273,888 515,693,739 | 617,675,639 GO] sctange ree (NPR) 109.40EURO (20.444 Men JPY 15,178,856100. u AUD 743299 80,62 THB 463,984 324 CHF 30012 108.59 CAD 47,515.16 82.81 SGD 46,299.81 79.83 HKD 61,440.00. 13.85 DKK 730583.83 16.96 Using the NRB capital adequacy framework, Cal a Risk weighted exposures for ctedit risk, b. Total risk weighted exposures adding operational income as capital charge for operational risk. Core capital ratio and capital adequacy r d. Comment on the results as per the NRB i tisk, and market risk. of the total RWE, and 3% of last year’s gross.