0901 FM (CFA540) - Page 1 of 29 Question Paper Finanical...

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Unformatted text preview: 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? (a) Securities Trading Corporation of India Limited (b) UTI Mutual Fund (c) Bank of Rajasthan (d) Discount and Finance House of India (e) State Bank of India. (1 mark) <Answer> 4. Which of the following statements is not true regarding Commercial Papers (CPs)? (a) They are negotiable by endorsement and delivery and hence are highly flexible instruments (b) They are issued in multiples of Rs.5 lakh, with the minimum investment of 5 lakh (c) The maturity varies from 30 days to a year (d) They normally have a buy-back facility (e) No prior approval of RBI is needed for CP issues. (1 mark) <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? (a) There are no trade controls and transportation costs (b) Both commodity and factor markets are perfectly competitive (c) There are constant or increasing returns to scale (d) Both the countries have the same technology (e) Labor and capital are perfectly immobile for inter-company transfers. (1 mark) <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> Page 2 of 29 7. Which of the following statements are true with respect to Crawling peg System? I. It is a hybrid of fixed and flexible exchange rate systems....
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This note was uploaded on 07/20/2010 for the course ICFAI CFA taught by Professor Cfa during the Fall '09 term at Indian School of Business.

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0901 FM (CFA540) - Page 1 of 29 Question Paper Finanical...

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