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chapter wise board question
Mutual fund
Q. 1 Balance Mutual fund provides you with the following data related unbalanced mutual
fund scheme. You are required to compute the Net Asset Value (NAV) on per unit basis.

Particulars ` (in Lakhs)

Cash in Hand 35.00
Expenditure for the year 105.75
Amount payable on shares 60.00
Fixed interest being securities at cost 320.00
Bonds & debentures at cost 1,050.00
Of these Bonds not listed & not Quoted 350.00
Listed Securities at cost 1,500.00
Dividend Income 61.00

Other Information.
1. No. of units of ` 100/- face value: 25,00,000.
2. Current realizable value of fixed income securities is appreciated at 115% of Cost.
3. Value listed bonds & debentures are appreciated by 20% of Cost.
4. Unlisted bonds & debentures are valued 20% below cost.
5. All the listed securities were purchased when market index was 12,000 & currently it
is 15,750.

Q. 2 R. Fund CPSE, a mutual fund which invests exclusively in Maharatna Companies yielded
` 4.24 per unit for the year. The opening NAV was ` 21.20. R Fund CPSE has a risk factor
of 3.50%. Ascertain Shape’s ratio and evaluate the funds performance in relation to with
the performance of the Sensex if-
i) Risk free Return is 5%, Return on Sensex is 15% with Standard Deviation of 2.75%.
ii) Risk free Return is 4%, Return on Sensex is 17% with Standard Deviation of 3%.
iii) Risk free Return is 7%, Return on Sensex is 18% with Standard Deviation of 4%.

Fundamental analysis
Q. 3 A company has a profit margin of 20% & Assets turnover Ratio 3 times. What is the
company’s return on investment? How will this return vary if
a) Profit margin is increased by 10%
b) Asset turnover is decreased by 4 times.
c) Profit margin is decreased by 5%
Note:- Treat each case individually.

Q. 4 From the information provided below prepare financial statements for LSK Ltd. for
financial year 2016-17:

Current Assets `1,00,000

Sales 50% of Shareholders Fund
Working Capital 80% of Current Assets
Quick Ratio 0.5 higher than standard industry ratio
Gross Profit 33 1/3rd of cost
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Fictitious Assets 20% of current Assets
Shareholder Funds 10 times of Current Assets
Cash: Debtors 1:1
Share Capital: Reserves and 3:2 (net profit for current year comprises
Surplus of 10% of Reserve and Surplus)

Bond valuation
Q. 5 Monkey Ltd. has issued fully convertible debenture with face value with face value `
1,000/- with a coupon rate of 12% p.a. which will be converted in 25 equity shares of `
10/- each at the end of 9 years. Find out the value of debenture if the expected rate of
return of an investor is 10% & expected market price of one share after 9 years is ` 48.

Q. 6 Tiger Ltd. has issued a debenture with face value ` 100/- bearing interest @ 10% p.a.
maturing after 6 years at par. The expected rate of return of an investor is 15%. Should
the investor buy the debenture if the current market price of debenture is ` 81.04/-

Q. 7 Mr. Lion wants to invest in one of the following bonds having face value ` 1,000 maturing
at par:
Bond Coupon Maturity Market Price
Bond M 12% p.a. 5 years ` 1,080/-
Bond N 15% p.a. 5 years ` 920/-

Recommend which bond should be purchased. Will your answer change if the required
rate of return is 14%.

Q. 8 Mr. Anik is planning for making investment in bonds of one of the companies i.e. either X
Ltd. or Y Ltd maturing at par. The details of these are as follows:

Company Face Value Coupon Rate Maturity Period

X Ltd. ` 10,000 6% 5 years
Y Ltd. ` 10,000 10% 5 years

The current market price of X Ltd.’s bond is `9,455/-. Find out the current market price of
Y Ltd.’s bond if both bonds have same yield to Maturity (YTM).

Q. 9 An investor is considering the purchase of the following bond

Face Value ` 1,000/-
Coupon Rate 10%
Maturity 4 years
i) If he wants yield of 12% what is the maximum price he should be ready to pay for?
ii) If the bond is selling for ` 940/- What would be his yield?

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Dividend decision
Q. 10 The following information pertains to CZ Ltd.

Total Earnings ` 60,00,000

Dividend Payout ratio 50%
No. of shares outstanding 3,00,000
P/E Ratio 8 times
Rate of Return on investment 15%
i. What should be the market value of share as per Walter’s Model?
ii. What is the optimum dividend payout ratio as per Walter’s Model?
iii. What will be the market value per share at optimum payout ratio as per Walter’s
Model?

Q. 11 Jai Chand Ltd. has a capital of ` 25,00,000 dividend in equity shares of ` 10 each. The
shares are currently quoted at ` 130/- per share. The company proposes declaration of a
dividend of 80% per share at the end of financial year.
The capitalization rate for the same class of company is 20%.

What will be market price of the share at the end of year Using M.M. Model if:
i. Dividend is declared
ii. Dividend is not declared

Assuming that the company pays the dividend & has net profits of ` 1,35,00,000 & makes
new investment of ` 3,00,00,000 during the period, how many new shares must be
issued?

Q. 12 Suraj holds 20% of shares in Infosys Ltd. He has assessed & found that Wipro Ltd. is of
same & equivalent risk class. As his financial advisor you are required to explain him
whether he will be better off in switching his holding to Wipro Ltd or not using the
following information.

Particulars Infosys Ltd Wipro Ltd

Total no. of Equity shares 1,00,000 2,00,000
Market Price Per Share ` 25 ` 20
10% Debentures ` 2,00,000 ` 4,00,000
Profit before interest ` 3,20,000 ` 5,20,000
Tax Rate 50% 50%

Note:- All profits available for distribution as dividend are distributed.

Q. 13 The earnings per share of a company is `10/- and the rate of capitalization applicable to it
is 10%. The company has two option of paying dividends i.e. (i) 50% or (ii) 75%. Calculate
the market price per share as per Walter’s Model, if it can earn return of
(a) 15% or (b) 10% and (c) 5% on its retained earnings.

Q. 14 Tendulkar Ltd’s equity shares currently sell for ` 32/- per share. The company’s finance
manager anticipates a constant growth of 10.5% and at the end of year dividend of `
2.50/- per share.
i) What is expected rate of return?

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ii) If the investor requires 17% return, should he purchase the stock? (Support your decision
with calculation)

Q. 15 Mr. Jack has a holding of 30% shares in Dance More Ltd. He has assessed and found that
Enjoy Life Ltd is of the equivalent risk class. As his financial advisor you are required to
explain him whether he will be better off in switching his holding to Enjoy Life Ltd or not
using following information:
Particulars Dance More Ltd. Enjoy Life Ltd.
Total No. of Equity Shares 10,00,000 5,00,000
Market Price per share `55 ` 165
10% Debentures ` 50,00,000 -
15% Debentures - ` 25,00,000
Profit Before Interest and Tax ` 65,00,000 ` 93,75,000
Tax Rate 50% 50%

Note: All the profit available for distribution as dividend to equity shareholders are
distributed in full.

Portfolio Theory
Q. 16 An investor is holding 2,500 shares of Jackson Ltd. where presently the rate of dividend is
` 5/- per share. The shares are presently sold in the open market at ` 35/- per share.
However several factors are likely to change during the course of the year as indicated
below.
Particulars Existing Revised
Risk free rate of return 13% 11%
Market risk premium 9% 6%
Beta 2.5 2.8
Expected growth rate 7% 10%

In the view of the above factors, whether the investor should buy additional shares, or
hold the current investment or sell off the current investment? & Why?

Q. 17 From the following available information analyse the two mutual funds & compute.
i. Sharpe’s Index for mutual fund A & B.
ii. Sharpe’s Index for market
iii. Treynor’s Index for mutual fund A & B.
iv. Evaluate the performance of mutual funds.

Mutual Average Beta Standard

Fund Return Deviation
A 10% 3 6
B 14% 5 8

The risk-free rate of return is 9%. The return on the market portfolio is 12%. The standard
deviation of the market is 7.

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Q. 18 Calculate Coefficient of Correlation from the following available information

Year % Returns of % Returns of % Market Returns

Josh Ltd. Jugnu Ltd.
1 7.00 6.00 10.00
2 11.00 12.00 12.00
3 9.00 14.00 10.00
4 12.00 10.00 13.00
5 11.00 13.00 11.00
Standard Deviation 4.00 10.00 1.70

Q. 19 From the following information you are required to calculate

1. Measure of systematic risk. (Beta)
2. Expected returns using measure of systematic risk (CAPM)
Year % Returns of TVS Ltd. % Returns of TATA Ltd. % Market Returns
1 10.00 13.00 11.00
2 12.00 15.00 13.00
3 14.00 17.00 15.00
4 14.00 12.00 12.00
5 18.00 14.00 11.00
6 11.00 12.00 10.00
7 12.00 15.00 12.00

Risk Free rate of return: 10.00%

Q. 20 From the historical rate of return of two securities and market over the past 10 years, you
are required to calculate the Covariance and Correlation Co-efficient of the two securities.

Year Rate of Return % SD

1 2 3 4 5 6 7 8 9 10
Security M 12 8 7 14 16 15 18 20 16 24 4.56
Security N 20 22 24 18 15 20 24 25 22 20 2.50
Market 15 17 18 12 14 20 23 22 20 18 2.30
(SD = Standard Deviation)

Q. 21 From the following data on three mutual funds find out:

i) Reward to Total Risk and
ii) Reward to Systematic Risk. Also Rank them

Fund Return (%) Standard Deviation (%) Beta

Blue Chip 17 7 1.05
Pharma 18 6 1.25
Banking 13 8 0.85

Fact: Risk Free rate is 7%

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Q. 22 The following are the returns of share (X) and market (M) for the last 6 years.
Year Return X (%) Return M (%)
1 17 12
2 10 10
3 18 12
4 -8 -9
5 6 5
6 11 6
i) What is the total risk of share and market?
ii) How much is systematic risk of share?

Q. 23 An investor has decided to invest ` 1,00,000/- in two companies. The estimates of return
on shares in companies under four different scenarios as under:

Scenario Probability Akshay Lt. Salman Ltd.

(%) (%)
1 0.20 13 16
2 0.25 14 10
3 0.25 -10 30
4 0.30 28 -4

Ascertain the risk associated with each class of the security?

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