Hourly Exam Spring-2021

Department of Business Administration

Subject: Financial Management & Application Submission Day: Friday

Instructor: Sumair Iqbal/ Rujaib / Abid Mehmood Submission Date: 02-Apr-2021
Program: BBA Max. Marks: 15

Please follow the instructions carefully:

1. Write your answers directly on the Black Board (recommended) or upload word file
before the due date on Blackboard.
2. Write your name and registration ID on the first page of your Word file.
3. Answer scripts can only be uploaded on Blackboard only during the submission time.
4. To avoid any unforeseen problems, you are advised to follow the Guide lines
communicated by the Faculty Members.
5. Submission of answer copy(ies) will be considered acceptable through Blackboard only.
Therefore, do not submit your document through email or any other medium.
6. Use 12 pt. font size and Times New Roman font style along with 1-inch page margins.
7. Follow the requirements of the word limit and the marking criteria while writing your
answers.
8. Provide relevant, original and conceptual answers, as this exam aims to test your ability to
examine, explain, modify or develop concepts discussed in class.
9. Do not copy answers from the internet or other sources. The plagiarism of your answers
may be checked through Turnitin.
10. Double check your word file before uploading it on BlackBoard to ensure that you have
uploaded the correct file with your answers.
Attempt all the questions (15 Marks)
1. What is the future value of 5,000 invested today if it earns 12% interest for one year?
2. What is the future value of 7,500 invested today if it earns 11% interest for eight
Years?
3. What is the present value of 900 to be received in two equal installments (450 each),
two years and five years from today, when the annual discount rate is 13%?
4. How many years will take 8,000 to grow to 32,000 if bank offered rate is 9%.
5. Consider an APR of 14% with monthly compounding. What is the EAR (effective
annual rate)?
6. A 7 year bond with par value 1000 Rupees has a current yield 8.5 percent and a
coupon rate of 9 percent. What is the bond’s price?
7. ABC Corporation has issued 13 percent annual coupon 1000 Rupees par value bonds
maturing in 10 years. What should be the current price of this bond if the interest rate
is 16 percent?
8. UBL bonds currently sell for 955 Rupees which has got 8 years maturity with a 16
percent annual coupon and have a per value of 1000 Rupees. What is their YTM?
9. Calculate the present value of 10 year bond with a par value of 1000 Rupees and
having 9% coupon rate if the current interest rate is 15%?
10. WMS, Inc., has 9 percent coupon bonds on the market that have 12 years left to
maturity. The bonds make semi-annual payments. If the YTM on these bonds is 12
percent, what is the current bond price?
11. ASL stock will pay a dividend this year of 2.60 per share. Its dividend yield is 9
percent. At what price is the stock selling?
12. Ismail Industries pays a dividend of 2 per year. The dividend yield on its stock is
reported at 8% percent. What price is the stock selling at?
13. You own a stock that will start paying 1.50 annually at the end of the year. It will then
grow each year at a constant annual rate of 5%. If the required rate of return is 16%,
what should you pay per share?
14. What should you pay for a stock assuming you expect the following: a dividend of 1.50
paid at the end of years 1 and 2; cost of equity equal to 16 percent; and, a selling price
of 45 at the end of two years?
15. You are considering investing in Lotte Chemicals. Suppose Lotte Chemical is currently
undergoing expansion and is not expected to change its cash dividend while
expanding for the next 4 years. This means that its current annual 2.50 dividend will
remain for the next 4 years. After the expansion is completed, higher earnings are
expected to result causing a 35% increase in dividends each year for 3 years. After
these three years of 35% growth, the dividend growth rate is expected to be 5% per
year forever. If the required return for Lotte Chemicals common stock is 17%, what is
a share worth today?