An initial investment of Rs. 200,000 is required to start the business; Rs. 9,000 per month is expec

Question No: 1 ( Marks: 1 ) – Please choose one
An initial investment of Rs. 200,000 is required to start the business; Rs. 9,000 per month is
expected to be earned for the first year and Rs. 20,000 would be earned every month in the second
year. How many months will it take to recover your initial investment?
4 14 months
4 16 months
4 18 months
4 20 months
Question No: 2 ( Marks: 1 ) – Please choose one
“Don’t put all eggs in one basket” explains concept of finance.
4 Time value of money
4 Risk and Return
4 Discounting and NPV
4 Portfolio Diversification
Question No: 3 ( Marks: 1 ) – Please choose one
is equal to risk per unit return.
4 Standard Deviation
4
4
4 Variance
Coefficient of Variation
None of the given options
Question No: 4 ( Marks: 1 ) – Please choose one
A bond that pays no annual interest but is sold at a discount below the par value is called:
4
4
4
4 An original maturity bond
A floating rate bond
A fixed maturity date bond
A zero coupon bond
Question No: 5 ( Marks: 1 ) – Please choose one
Since preferred stock dividends are fixed, valuing preferred stock is roughly equivalent to valuing:
4
4
4
4 A zero growth common stock
A positive growth common stock
A short-term bond
An option

Question No: 6 ( Marks: 1 ) – Please choose one
An unincorporated business owned by one individual is called .

4
4
4
4 Partnership
Company
Sole proprietorship
None of given options
Question No: 7 ( Marks: 1 ) – Please choose one

is a ratio of the present value of future cash flows to the initial investment.
Return on Investment
NPV
Payback Period
Profitability Index
4
4
4
4
Question No: 8 ( Marks: 1 ) – Please choose one
is the actual price at which share is bought or sold.
4
4
Fair price
Par value
4
4 Market price
Written down value
Question No: 9 ( Marks: 1 ) – Please choose one
ratio gives an indication how equity investors regard the company’s value.

4
4
4
4 Price / Earning
Market / Book
Earning / Share
Price / Cash flow
Question No: 10 ( Marks: 1 ) – Please choose one
In the formula rCE = (D1V1/Po) + g, what does (D1V1/Po) represent?
4
4
4
4 The expected dividend yield from a common stock
The expected price appreciation yield from a common stock
The dividend yield from a preferred stock
The interest payment from a bond
Question No: 11 ( Marks: 1 ) – Please choose one

For a given nominal interest rate, the more numerous the compounding periods, the less the
effective annual interest rate.
4
4 True
False
Question No: 12 ( Marks: 1 ) – Please choose one
The current ratio is never larger than the quick ratio.
4
4 True
False
Question No: 13 ( Marks: 1 ) – Please choose one
When interest rates go up, the market price of a bond goes up.
4
4 True
False
Question No: 14 ( Marks: 1 ) – Please choose one
Maximizing the price of a share of the firm’s common stock is the equivalent of maximizing the
wealth of the firm’s present owners.
4
4 True
False
Question No: 15 ( Marks: 1 ) – Please choose one
You can reduce systematic risk by adding more common stocks to your portfolio.
4
4 True
False

Question No: 16 ( Marks: 3 )
Assume that one year from now; you will deposit Rs. 1,000 into a saving account that pays 8%
interest. If the bank compounds interest semi-annually, how much will you have in your account
four years from now?
Question No: 17 ( Marks: 3 )
How much should you pay for the preferred stock of the PST Corporation, if it has Rs. 50 par
value, pays Rs. 20 a share in annual dividends, and your required rate of return is 15%.
Question No: 18 ( Marks: 3 )
What is a portfolio? Why an investor should invest his/her funds in a portfolio rather than in the
stocks of a single corporation.
Question No: 19 ( Marks: 3 )
What do you mean by yield to maturity (YTM) of a bond? Explain briefly.
Question No: 20 ( Marks: 3 )
Explain briefly the Constant Growth Dividends Model of common stocks valuation.
Question No: 21 ( Marks: 10 )

Snyder Computer Chips Inc. is experiencing a period of rapid growth. Earnings and dividends are
expected to grow at a rate of 15% during the next 2 years, at 13% in the third year, and at a
constant rate of 6% thereafter.
Snyder’s last dividend was Rs. 1.15, and the required rate of return on the stock is 12%.
Required:
I. Calculate the expected dividends of the firm in the first three years.
II. Calculate the fair value per share of these stocks at the end of third year.