Finance Answers

You want to increase your position in XYZ Inc. The current share price is $10. You need a margin deposit of 20% to open the position. If you put down $1000 to open the trade, how many shares do you have exposure to?

. A firm currently sells $500,000 annually with 3% bad debt losses. Two alternative policies are available. Policy A would increase sales by $300,000, but bad debt losses on additional sales would be 8%. Policy B would increase sales by an additional $120,000 over Policy A and bad debt losses on the additional $120,000 of sales would be 15%. The average collection period will remain at 60 days (6 turns per year) no matter the policy decision made. The profit margin will be 20% of sales and no other expenses will increase. Assume an opportunity cost of 20%

In Virtual Reality, time travel became possible only in 3002. Economists in the Statistics Bureau decided to conduct a Consumer Expenditure Survey in both 3001 and 3002 to check the substitution bias of the CPI.

(a)  All investments offer a balance between risk and potential return.  The bond market is no exception to this rule.

(i)                Discuss reasons why bonds are considered less risky than stocks.    

(ii)             Explain determining factors which make bonds a high yielding and perfect choice for investors.                                                                                        

(b)  Describe the risks associated with investing in government and corporate bonds.    

Explain the term ‘beta of a stock measure’?  

You want to purchase the French Government Bond OAT. You are looking for a maturity between 5-10 years. The initial margin requirement in this maturity range is 10% of market value. The bond you select is trading at 115.00 with a face value of EUR 1000. You wish to invest EUR 1000. How many bonds can you purchase, given the margin requirement?

a)5

b)8

c)9

d)10

You want to purchase the French Government Bond OAT. You are looking for a maturity between 5-10 years. The initial margin requirement in this maturity range is 10% of market value. The bond you select is trading at 115.00 with a face value of EUR 1000. You wish to invest EUR 1000. What is your resulting total exposure and actual margin requirement?

a)EUR 10,000 for a margin of EUR 1000

b)EUR 8,000 for a margin of EUR 800

c)EUR 9,200 for a margin of EUR 920

Thank you :)

An investor invests $10000 in stocks trading at $100. If the price for these shares goes up by 30% and ignoring dividends, what would be the investor’s expected rate of return? Assuming the investor borrows another $10000 from a broker and invests in the same stocks to buy more of the same shares and the margin loan interest is 9% per year, what will his rate of return be now if the stocks goes up by 30%, ignoring dividends, again ? Suppose the investor only borrows $5000 at the same interest rate of 9% per year, what will the rate of return be if the share price goes up by 30%? If it goes down by 30%, and if it remains unchanged? 

. An Engineering Company is considering an investment proposal to install new milling controls. The project cost is `. 50,000. The facility has life of 5 years and no salvage value. The company’s tax rate is 55 %. The estimated cash flows before tax (CFBT) from the proposed investment proposal are as follows:                                                                                4

Year​​​​​​CFBT (`)

1​​​​​​10,000

2​​​​​​11,000

3​​​​​​14,000

4​​​​​​15,000

5​​​​​​25,000

Compute the following:

i) Pay- Back Period

ii) Average rate of return

iii) Net present value at 10% discount rate

iv) Profitability index at 10% discount rate

1 Empire Ltd. needs Rs 1,000,000 to build a new factory which will yield EBIT of Rs .150,000 per year. The company has to choose between two alternative financing plans: 75 per cent equity and 25 per cent debt or 50 per cent equity and 50 per cent debt. Under the first plan shares can be sold for Rs 40 per share and the interest rate on debt will be 16 per cent. Determine the EPS 

You are planning to retire in twenty years. You'll live ten years after retirement. You want to be able to draw out of your savings at the rate of $10,000 per year. How much would you have to pay in equal annual deposits until retirement to meet your objectives? Assume interest remains at 9%

The By-Laws (On Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (MIA) mentions five fundamental principles which the MIA members must comply with. Which among those five that in your view could have made the audit firm Parker Randall fail to be the right candidate for the position of company auditor for the 1MDB? Explain your answer.