FINAL EXAMINATION
Syllabus 2016
Paper 14: STRATEGIC FINANCIAL MANAGEMENT (SFM)
Time Allowed: 3 Hours Full Marks: 100
There are Sections A, B, C and D to be answered subject to instructions given against each.
Section A 20 X 1
You are required to answer all the questions. Each question carries 1 mark. = 20
Instructions: Each question is followed by 4 Answer choices and only one is correct. You are required to Marks
select the choice which according to you represents the correct answer.
1. a. In case of divisible projects, which of the following can be used to attain maximum NPV?
(i) Feasibility Approach
(ii) Internal Rate of Return
(iii) Profitability Index Approach
(iv) Any of the above
b. Where the costs and revenues change at differing rates of inflation, it is known as __________.
(i) differential inflation
(ii) general inflation
(iii) synchronized inflation
(iv) specific inflation
c. Which of the following items can the lessee can claim as an expenditure ?
(i) Lease rent
(ii) Insurance and repairs
(iii) Maintenance expenses
(iv) All the above
d. ABC Leasing Company expects a minimum yield of 10% on its investment in the leasing business. It
proposes to lease a machine costing Rs. 5,00,000 for 10 years. If yearly lease payments are received
in advance, the lease rental to be charged by the company for lease will be:
(i) Rs. 81,372
(ii) Rs. 72,370
(iii) Rs. 73,975
(iv) Rs. 84,130
e. XYZ Ltd. has a debt-equity mix of 30/70. If XYZ Ltd.’s debt beta for its activity (or projects) is 1.21,
what is the beta for its equity?
(i) 1.65
(ii) 1.52
(iii) 1.60
(iv) 1.68
, f. Assume CAPM is correct, you are holding a stock, which has a beta of 1.5 and is currently in
equilibrium. The required return on stock is 12% and the expected return on the market is 10%.
Suddenly due to economic conditions, the expected return on the market increases by 20%. If
nothing else changes, how much will this affect your required premium?
(i) +20%
(ii) -25%
(iii) +25%
(iv) +30%
g. Markowitz Portfolio Theory is most concerned with __________.
(i) the elimination of systematic risk
(ii) the effect of diversification on portfolio risk
(iii) the identification of systematic risk
(iv) active portfolio management to enhance return
i. ABC Ltd. intends to invest Rs. 50 lakhs in commercial paper and has received the following quotes
from primary leader: Bid 5.30%, Ask 5.00%. if the maturity period of the Commercial Paper is 45
days, the investment amount will be (assume day count basis as “actual/365”)
(i) Rs.49,67,541
(ii) Rs. 49,69,367
(iii) Rs. 49,68,454
(iv) None of the above
j. According to CAPM assumptions, variances, expected returns, and covariance of all assets are
________.
(i) identical
(ii) not identical
(iii) fixed
(iv) variable
k. An average return of portfolio divided by its standard deviation is classified as ______________.
(i) Jensen’s alpha
(ii) Treynor’s variance to volatility ratio
(iii) Sharpe’s reward to variability ratio
(iv) Treynor’s reward to variability ratio
l. The portfolio’s return is 14%. The market’s and fund’s returns standard deviations are 4 and 3. The
fund’s beta value is 1.5. The risk free rate of return is 5%. the Treynor index is ________.
(i) 6.0
(ii) 5.1
(iii) 0.48
(iv) 7.0
n. PQR Company’s equity share is expected to provide a dividend of Rs. 3 and fetch a price of Rs. 40 a
year. What price would it sell for now if investors’ required rate of return is 15%?
(i) Rs. 35.50
(ii) Rs. 38.27
(iii) Rs. 37.39
(iv) Rs. 40.00
Syllabus 2016
Paper 14: STRATEGIC FINANCIAL MANAGEMENT (SFM)
Time Allowed: 3 Hours Full Marks: 100
There are Sections A, B, C and D to be answered subject to instructions given against each.
Section A 20 X 1
You are required to answer all the questions. Each question carries 1 mark. = 20
Instructions: Each question is followed by 4 Answer choices and only one is correct. You are required to Marks
select the choice which according to you represents the correct answer.
1. a. In case of divisible projects, which of the following can be used to attain maximum NPV?
(i) Feasibility Approach
(ii) Internal Rate of Return
(iii) Profitability Index Approach
(iv) Any of the above
b. Where the costs and revenues change at differing rates of inflation, it is known as __________.
(i) differential inflation
(ii) general inflation
(iii) synchronized inflation
(iv) specific inflation
c. Which of the following items can the lessee can claim as an expenditure ?
(i) Lease rent
(ii) Insurance and repairs
(iii) Maintenance expenses
(iv) All the above
d. ABC Leasing Company expects a minimum yield of 10% on its investment in the leasing business. It
proposes to lease a machine costing Rs. 5,00,000 for 10 years. If yearly lease payments are received
in advance, the lease rental to be charged by the company for lease will be:
(i) Rs. 81,372
(ii) Rs. 72,370
(iii) Rs. 73,975
(iv) Rs. 84,130
e. XYZ Ltd. has a debt-equity mix of 30/70. If XYZ Ltd.’s debt beta for its activity (or projects) is 1.21,
what is the beta for its equity?
(i) 1.65
(ii) 1.52
(iii) 1.60
(iv) 1.68
, f. Assume CAPM is correct, you are holding a stock, which has a beta of 1.5 and is currently in
equilibrium. The required return on stock is 12% and the expected return on the market is 10%.
Suddenly due to economic conditions, the expected return on the market increases by 20%. If
nothing else changes, how much will this affect your required premium?
(i) +20%
(ii) -25%
(iii) +25%
(iv) +30%
g. Markowitz Portfolio Theory is most concerned with __________.
(i) the elimination of systematic risk
(ii) the effect of diversification on portfolio risk
(iii) the identification of systematic risk
(iv) active portfolio management to enhance return
i. ABC Ltd. intends to invest Rs. 50 lakhs in commercial paper and has received the following quotes
from primary leader: Bid 5.30%, Ask 5.00%. if the maturity period of the Commercial Paper is 45
days, the investment amount will be (assume day count basis as “actual/365”)
(i) Rs.49,67,541
(ii) Rs. 49,69,367
(iii) Rs. 49,68,454
(iv) None of the above
j. According to CAPM assumptions, variances, expected returns, and covariance of all assets are
________.
(i) identical
(ii) not identical
(iii) fixed
(iv) variable
k. An average return of portfolio divided by its standard deviation is classified as ______________.
(i) Jensen’s alpha
(ii) Treynor’s variance to volatility ratio
(iii) Sharpe’s reward to variability ratio
(iv) Treynor’s reward to variability ratio
l. The portfolio’s return is 14%. The market’s and fund’s returns standard deviations are 4 and 3. The
fund’s beta value is 1.5. The risk free rate of return is 5%. the Treynor index is ________.
(i) 6.0
(ii) 5.1
(iii) 0.48
(iv) 7.0
n. PQR Company’s equity share is expected to provide a dividend of Rs. 3 and fetch a price of Rs. 40 a
year. What price would it sell for now if investors’ required rate of return is 15%?
(i) Rs. 35.50
(ii) Rs. 38.27
(iii) Rs. 37.39
(iv) Rs. 40.00
