Finance Answers

Explain the concept of “gearing” and its impact on a business. 

As an expert, advise on finance decision issues on equity and loan funds.

Explain the concept of “gearing” and its impact on a business. 

Suppose you believe that Florio Company's stock price is going to decline from its current level of $82.50 sometime during the next 5 months. For $5.10 you could buy a 5-month put option giving you the right to sell 1 share at a price of $90 per share. If you bought this option for $5.10 and Florio's stock price actually dropped to $60, what would your pre-tax net profit be?

The prevailing market rates are as follows.

INR/USD = Rs. 77.00

Interest rate for a 6 month loan in India = 12% per annum

Interest rate for a 6 month loan in USA = 6% per annum

a. Explain the concept of Interest Rate Parity. What will be the expected 6 -months

forward rate for US dollar in India?

b. Compute the Forward premium/discount of USD/INR in the Indian Forex Market?

Identify which party is playing what role in the following Letter of Credit transaction. ABC Limited wants to import raw material from Z123 Limited, a supplier in Germany who banks with T.R.V. Bank. The supplier insists that ABC Limited issue a Letter of Credit for the full value of the transaction. A tenure of 90 days is agreed upon. ABC Limited approaches N.O.P. Bank to issue a Letter of Credit. You are required to identify the steps involved in a Letter of Credit transaction. Also Identify which party is playing the role of  Issuing Bank  Beneficiary  Applicant  Beneficiary Bank 

 ABC Limited, an Indian Company has an export exposure of 10 million Yen. Yen is not directly quoted against the Rupee. The current spot rates are USD/INR = 41.79 and USD/JPY =129.75. It is estimated that Yen will depreciate to 144 level and Rupee to depreciate against Dollar to 43. The Forward rate for September 2020 USD/YEN = 137.35 and USD/INR 42.89. Given that the actual spot rate on 30 September 2020 was USD/YEN = 137.85 and USD/INR = 42.78, is the decision to take forward cover justified in hindsight? 

From the following information, furnished by Ms. Anucampa pertaining to the financial year ended as on 31st march 2021, Short term capital gains on sale of shares in an Indian company received in Japan 10000 Dividend from a Chinese company received in China 3000 Agricultural income from land in Madhya Pradesh 5000 Dividend from PJV Ltd an Indian Company 4745 Gross Rent from a residential property located at Singapore, later on remitted to the saving account in Bank of Maharashtra, Mumbai using the approved channels 600000 Compute the total income and give reason for considering/ not considering these specific items for the relevant assessment year 2021-22, if she is

a. Resident and ordinary resident

b. Non resident 

Ms. Madhu is a single mother, aged 35 years. As a single parent, she has the complete financial responsibility of her parents and a 8 year old son on her shoulders. Given the current Covid 19 situation, she is not sure about where to invest her money. Keeping her current status into mind:

a. Explain which insurance policy would you suggest her to take for her 8year old son and why? 

b. What are the other lucrative investment options you would suggest her for a better return? Discuss. 

Dr. Naina who is 27 yrs old has just completed her PhD and is newly employed with XYZ University. She has no knowledge about financial investments apart from traditional investments like FD/RD. So, she approaches her relationship manager in bank for financial advise. As her relationship manager, which financial products would you suggest her to invest into, considering her age and risk appetite. Also consider her tax liabilities so that she can avail the benefit of the investments.

Mr. Lalit has a total annual income of 16 lacs p.a. His salaried income is 11 lacs and remaining 5 lacs is agricultural income. It is time for him to file yearly tax return. Which tax slab does Mr. Lalit fall into? Accordingly, list all the possible deductions/allowances which Mr. Lalit can avail under different heads (with section).