BOND AND BOND VALUATION
Question 1 : A bond with face value $1000 , coupon rate 12% with a maturity period of 10years is selling
at 950. What is the current yield.
Answer: Current Yield=Coupon/Current Price=120/950=12.63%
Question 2: $1000 par value bond
INVESTMENT CRITERIA- NPV, MODIFIED NPV, IRR, MODIFIED IRR, PROFITABILITY INDEX, ACCOUNTING
RATE OF RETURN
NPV
Question-1: The cash flow of the project is as follows. Decide if the project is acceptable when the
discount rate is 10%
Year
Cashflow($)
0
-100
RISK AND RETURN PORTFOLIO THEORY
Question 1: Calculate the Portfolio Return and Variance when the investment is made in equal
proportion. Also calculate the proportion of investment which will minimize the variance.
State of the
economy
A
B
C
D
E
Answer:
PRESENT VALUE,FUTURE VALUE,ANNUITY,ANNUITY DUE,PERPETUITY
Questions:
a. What is the relationship between discounting and compounding?
b. Distinguish between the present value factor and the annuity present value factor?
c. 1. What will $ 6,700 invested fo
Question 1 : A student obtains ANNUAL rainfall totals for Bedford, Bedforshire
for the years 1900-1988. The student draws a histogram and finds that the
station's annual rainfall totals can be approximated by a normal distribution with
a mean of 752.4mm a
Question-1: The earning per share of a company is $10. It has an internal rate of return of 15% and the
capitalization rate of the risk class is 12.5%. If Walter model is used (i) what should be the optimum payout ratio of the firm (ii) what would be the
Question-1: A share is currently selling for $65. The company is expected to pay a dividend of %2.50 per
share at the end of the year. It is reliably estimated that the share will sell for $78 at the end of the year.
a) Would you hold the share for one ye
MACHINE REPLACEMENT STRATEGY
Question 1 : A widget manufacturer operates two machines , each of which has a capacity of 1000 units
a year. They have an indefinite life and zero salvage value. The operating cost is $2 per widget. Widget is
a seasonal busin
Traveling Salesman
Problem
(TSP)
What is TSP ?
Suppose a salesman has to visit n-cities .
He wishes to start from a particular city ,
visit each city once , and then return to
his starting point .
The objective is to select the sequence in
which the citie
Valuation of Bond and
Stock
Financial Management
Professor Banikanta Mishra, XIMB, XUB,
India
Visiting Professor, University of Turin,
Italy
CF of the Typical Bond
Maturity Date
t=0
t=1
t=2
t=3
t=T
Coupon
C1
C2
C3
CT
Face-Value
12/01/16
FV
Professor Banik
Time Value of Money
Banikanta Mishra
Professor of Finance
Xavier Institute of Management, XUB
Bhubaneswar, India
Real Rate
Even in the absence of inflation,
even assets without risk
(say a guaranteed bank deposit)
give a return (call it the interest rate)
Risk and Return
Banikanta Mishra
Xavier Institute of Management,
Bhubaneswar
Measuring Risk of Shares
Re = RF + RP (Risk Premium)
Risk Premium = (Magnitude of) Risk x RP per Unit
So, we must learn how to measure Risk.
We need to understand how investors g
IRV
Banikanta Mishra
Practice Assignment - 1
1. If the rate is 21%, what is the PV of Rs.550 to be received after six months?
2. Bank Banque claims to double your money in 70 months. What rate is it offering?
3. A bank which follows quarterly compounding
Assignment- 1
Name- Bindhya Basini Mishra
Roll- [email protected]
Answer 1-
less
less
less
Sale value per unit
Direct material
Direct labour @
Rs.20 per labour
hour
Variable overheads
CONTRIBUTION
Product X
295
75
80
Product Y
390
120
100
Product Z
An Introduction to Risk and Return
Professor Banikanta Mishra, WHU-Koblenz, Fall 2000
We learnt in stock-valuation that ks = RF + Risk Premium
Risk Premium should be equal to Amount of Risk x Risk-Premium per Unit
Risk
But, how do we measure risk?
To meas
CASE:1 Multi-product BEP
Man Ltd. manufactures and sells the following products as per sales mix given. The
operating costs are also given.
Products
Operating cost as % of sales
A
72
B
75
C
70
D
60
Total budgeted sales for one month is Rs.10,00,000.
% of
Bohemia Industries
Discussion
Profit under alternative costing methods
Units
Opening stock
Manufactured during the period*
Unit selling price
Admin., Selling & Distribution cost (Fixed)
How much is the profit under total costing &
marginal costing if 10,0
Financial Markets History &
EMH
Financial Management
Banikanta Mishra
Ravenshaw University
January March 2009
Dollar Return
What is your Dollar Return if you buy a stock for $200 and sell it for $225 after a year?
t=0
t=1
Buy stock for $200
Sell stock for
1. Connect these two nations with respect to major global event held recently
2. Connect the following monuments with a character/person. (He will be in news
again in a few days, two weeks before being in news in US)
3. Members of the IAS/IFS/IPS are allo
1: South sudan and Kosovo new entrant nations in Rio Olympics 2016.
2: Robert Langdon/ Don Brown (Hint was Inferno hits the theatres on 14 Oct, while 28 Oct in US)
3. To get married to an officer of another (perhaps more plum) state cadre and request for
1. Connect the pictures and identify the mastermind behind that.
+
2. Victim of. was helped by John William and Warren Entsch.
3. Which ratio is undefined for a Debt free company.
4. Connect the pictures.
+
+
Or
5. There is an image of Lord Ganesha on the
Kiss The Mirror
A middle school for girls was faced with a unique problem. A number of girls were beginning
to use lipstick and would put it on in the bathroom. That was fine, but after they put on their
lipstick they would press their lips to the mirrors
BOND AND BOND VALUATION
Question 1 : A bond with face value $1000 , coupon rate 12% with a maturity period of 10years is selling
at 950. What is the current yield.
Answer: Current Yield=Coupon/Current Price=120/950=12.63%
Question 2: $1000 par value bond
RISK AND RETURN PORTFOLIO THEORY
Question 1: Calculate the Portfolio Return and Variance when the investment is made in equal
proportion. Also calculate the proportion of investment which will minimize the variance.
State of the
economy
A
B
C
D
E
Answer:
INVESTMENT CRITERIA- NPV, MODIFIED NPV, IRR, MODIFIED IRR, PROFITABILITY INDEX, ACCOUNTING
RATE OF RETURN
NPV
Question-1: The cash flow of the project is as follows. Decide if the project is acceptable when the
discount rate is 10%
Year
Cashflow($)
0
1
2
MACRS DEPRICIATION AND CASH-FLOW
Question : ABC Company purchased a computerized system at $160000 and follows 5-year MACRS
depreciation. What is the after tax cash flow if the computer system is sold in 4 th year at $10000 and also
if sold at $30000.
Ans
LOAN REPAYMENT INSTALMENT
Question : A loan of 20,000 is being repaid by 20 semi-annual payments, with the first payment made
one-half year after the loan. The first ten payments are K each and the final ten payments are K+200
each. Find K if the effectiv
AMORTIZATION OF A LOAN
Question : A loan of $22000 at an interest rate of 12% compounded annually to be repaid over 6 years
period. What is the EMI and show the amortization table.
Answer:
Annuity factor=1/(1.12^1)+1/(1.12^2)+1/(1.12^3)+1/(1.12^4)+1/(1.12
CAPITAL RESTRUCTURING BREAKEVEN EBIT
Question : ABC company has 200000 shares and the current share price is $20. The company wants to
infuse debt of $1m. If the restructuring is expected to increase EPS , what is the minimum level of EBIT
needed. Ignore