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Dear sir, I have problem in identifying the variables in pyq. Like for example, june 2010 Q2..
i) I know the Pe is the zero coupon bond.
But how about Pa ? Shouldn’t it always be share price ? How to get 8.6m?ii)And is there a technique to calculate maximum price n premium? For this kind of question, i feel i cant do it, because i dont know how to calculate the max price n premium. I just know to calculate the basics like d1 d2 , will i fail in question like this?
iii) in this case, how do i know its a call or put option? Its a call option because aggrochem wants to buy leverchem or other reasons?
iv) i realise p4 required lots of written parts. In order to improve the written part what can i do? Study textbook?? Or just memorize advantages n disadvantages of models / approach will do?
Please clear my doubts!! Thank u!!
Firstly, I would not spend too much time on the questions from June 2010. It was the previous examiner who set some awful question – the new examiner took over from December 2010 and his questions are much more fair 🙂
However, in answer to your questions:
1) No. Pa is not always the share price. In this question it is not asking about share options but real options. Pa is the total value of the assets in the combined company (4400 + 4200).
2) Calculating the premium is not so much a technique as to understanding what is happening. Having calculated how much the company is worth the the acquirer then the premium is simply the difference between that value and the current value of the shares they they are acquiring.
3) You are right in that there are a lot of written parts! However most of them are either using knowledge from Paper P3, or talking sensible about the situation and the calculations that were in other parts of the question.
4) I feel that better than reading the textbook you should instead learn from answers to past questions (and other exam-standard questions in your revision/exam kit – you must have a revision/exam kit from one of the ACCA approved publishers)
Those are the most important question to practice first, but the more practice the better which is why you really should get a Revision/Exam Kit from one of the ACCA approved publishers.
Dear John,
I would like to know if I get d1 value 1.6482, can I round to 1.65 and use the table to get N(d1) and since it is positive plus with 0.5 and the same way goes for d2.
Do I really need to go through look to 1.64 and 1.65 and then get the value? I am not really sure how to do this and hence can I just round up. Will it affect my exam marks?
Thank.
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