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0901 FM (CFA540) - Question Paper Finanical...

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Page 1 of 29 Question Paper Finanical Management (CFA540): January 2009 Answer all 75 questions. Marks are indicated against each question. Total Marks : 100 1. The market price of a share is Rs.150, the rate of return is12%, cost of equity capital is 11% and earnings per share is Rs.15. According to Gordon’s Capitalization model, the retention ratio of the firm is (a) 20% (b) 30% (c) 40% (d) 50% (e) 60%. (1 mark) <Answer> 2. Banks borrow in call money market to I. Meet the Cash Reserve Ratio (CRR) requirements which they should maintain with RBI. II. Meet the Statutory Liquidity Ratio (SLR) requirements which they should maintain in liquid assets. III. Meet sudden demands for funds, which may arise due to large payments and remittances. IV. Meet the short term lending requirements. (a) Only (I) above (b) Both (I) and (II) above (c) Both (I) and (III) above (d) Both (II) and (IV) above (e) (I), (III) and (IV) above. (1 mark) <Answer> 3. Only few financial institutions are allowed to both borrow and lend in call money market. Which of the following financial institutions cannot do both the activities? <Answer> 4. Which of the following statements is not true regarding Commercial Papers (CPs)? <Answer> 5. The Heckscher-Ohlin Model explores the possibility of two nations benefit by trading with each other. Which of the following statements is not true with respect to the assumptions of this Model? <Answer> 6. A transaction which increases the external purchasing power of the country is recorded as credit item. Which of the following items is not a credit item? (a) Merchandise exports (b) Travel (c) Insurance (d) Borrowing abroad (e) Increase in foreign exchange reserves and gold reserves of the monetary authority. (1 mark) <Answer>
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