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Financial Math
Hafiz wanted to buy a brand-new car. He could only afford to pay RM 5000 for a down payment and decided to take a loan to finance the balance of the 139770
Financial Math
Mina invest her savings of R24 000 in an account that pays 7.5% interest per year, compounded monthly. The amount that she will have in her account after three years is
Financial Math
4. a) John LTD is a listed company on the Ghana Stock Exchange Market and showed the following performance. The following was made available to you.
Current market price per share (as at 31/12/2017)=$10
Dividend per share 2017=$1
Expected growth rate returns=27%
The government treasury bill rate=24%
The beta factor of john ltd=1.4
Required
i)what is the estimated cost of equity using the dividend growth model?
ii)what is the estimated cost of equity using the Capital Assets Pricing model?
Current market price per share (as at 31/12/2017)=$10
Dividend per share 2017=$1
Expected growth rate returns=27%
The government treasury bill rate=24%
The beta factor of john ltd=1.4
Required
i)what is the estimated cost of equity using the dividend growth model?
ii)what is the estimated cost of equity using the Capital Assets Pricing model?
Financial Math
3. The chairman of the company receives a call from an angry shareholder who own 3,000 shares. The shareholder argues that he will suffer a loss in his personal wealth due to this rights issue, because the new shares are being offered at a price lower than the current mark value. The chairman assures him that his wealth will not be reduced because of the rights issue, as long as the sharesholder takes appropriate action.
Required:
Prepare a statement showing the effects of the right issue on this particular shareholder’s wealth, assuming he exercises the rights and sells half of it.
Required:
Prepare a statement showing the effects of the right issue on this particular shareholder’s wealth, assuming he exercises the rights and sells half of it.
Financial Math
2. a) Distinguish between fiscal policy and monetary policy.
b) Explain three (3) adverse effects a contractionary fiscal policy could have on businesses.
c) Moorgate Ghana Limited has issued 100,000 $1 par equity shares which are at present selling for $4.00 per share. The company has plans to issue rights to purchase one new equity share at a price of $2.50 per share for every three shares.
Required:
i)calculate the theoretical ex rights price of Moogate’s equity shares.
ii)calculate the theoretical value of a Moorgate right, before the shares sell ex rights.
b) Explain three (3) adverse effects a contractionary fiscal policy could have on businesses.
c) Moorgate Ghana Limited has issued 100,000 $1 par equity shares which are at present selling for $4.00 per share. The company has plans to issue rights to purchase one new equity share at a price of $2.50 per share for every three shares.
Required:
i)calculate the theoretical ex rights price of Moogate’s equity shares.
ii)calculate the theoretical value of a Moorgate right, before the shares sell ex rights.
Financial Math
1. a) You have won a lottery. Lottery officials offer you the choice of the following alternative payout: Alternative 1: $300,000 two years from now. Alternative 2: $950,000 four years from now. What discount rate makes the two alternatives equally attractive to you?
b) You have $11,000 in an account earning 15% interest per annum. How large annuity can you draw out each year if you want nothing left at the end of 5years?
c) Stanbic Bank pays 12% per annum simple interest on its savings account balance and SG Bank pays 12% per annum interest compounded weekly. If you made a $14,000 deposit in each bank, how much more money would you earn from SG account over Stanbic Bank account at the end of 3years?
d) You invested in a mutual fund that offers 12% interest per annum. How long will it take your investment of $350,000 to grow to $2million?
b) You have $11,000 in an account earning 15% interest per annum. How large annuity can you draw out each year if you want nothing left at the end of 5years?
c) Stanbic Bank pays 12% per annum simple interest on its savings account balance and SG Bank pays 12% per annum interest compounded weekly. If you made a $14,000 deposit in each bank, how much more money would you earn from SG account over Stanbic Bank account at the end of 3years?
d) You invested in a mutual fund that offers 12% interest per annum. How long will it take your investment of $350,000 to grow to $2million?
Financial Math
5. a)consider the following securities and possible state of the economy;
State of the economy Probability Security A Security B Security C Security D
Normal 0.3 0.12 15% 11% 0.130
Boom 0.3 15% 0.110% 0.13 16%
Recession 0.4 17% 12% 11% 20%
Which security will you advise an investor to opt for and why?
b) An investor anticipates Newco’s Security will reach $30 by the end of year. Newco’s beta is 1.3. Assume the return on the market is expected to be 16% and risk free rate is 4%. Calculate the expected return of Newco’s share in one year and determine whether the share is undervalued, overvalued or properly valued with a current value of $25.
c) Differentiate between non-diversifiable risk and liquidity risk.
d) As a trustee of a bond holders, provide two covenants you will insist to be stated in the bond contract. Give reasons for your answer.
State of the economy Probability Security A Security B Security C Security D
Normal 0.3 0.12 15% 11% 0.130
Boom 0.3 15% 0.110% 0.13 16%
Recession 0.4 17% 12% 11% 20%
Which security will you advise an investor to opt for and why?
b) An investor anticipates Newco’s Security will reach $30 by the end of year. Newco’s beta is 1.3. Assume the return on the market is expected to be 16% and risk free rate is 4%. Calculate the expected return of Newco’s share in one year and determine whether the share is undervalued, overvalued or properly valued with a current value of $25.
c) Differentiate between non-diversifiable risk and liquidity risk.
d) As a trustee of a bond holders, provide two covenants you will insist to be stated in the bond contract. Give reasons for your answer.
Financial Math
c) Fanta ltd has a dividend cover of five (5) times and recorded the following earnings after tax;
YEAR EARNINGS $
2011 100,000
2012 120,000
2013 180,000
2014 220,000
2015 300,000
Calculate the average dividend growth rate for Fanta ltd.
YEAR EARNINGS $
2011 100,000
2012 120,000
2013 180,000
2014 220,000
2015 300,000
Calculate the average dividend growth rate for Fanta ltd.
Financial Math
5. use NPV and internal rate of return criteria to advise the company on whether the machine should be acquired or rejected.
b) Thelma holds two bonds; a 30year coupon bond with a face value of $30million. Suppose interest rate increased from 8% to 9%, which bond will have the greater decline in price?
b) Thelma holds two bonds; a 30year coupon bond with a face value of $30million. Suppose interest rate increased from 8% to 9%, which bond will have the greater decline in price?
Financial Math
4. a) John LTD is a listed company on the Ghana Stock Exchange Market and showed the following performance. The following was made available to you.
Current market price per share (as at 31/12/2017)=$10
Dividend per share 2017=$1
Expected growth rate returns=27%
The government treasury bill rate=24%
The beta factor of john ltd=1.4
Required
i)what is the estimated cost of equity using the dividend growth model?
ii)what is the estimated cost of equity using the Capital Assets Pricing model?
Current market price per share (as at 31/12/2017)=$10
Dividend per share 2017=$1
Expected growth rate returns=27%
The government treasury bill rate=24%
The beta factor of john ltd=1.4
Required
i)what is the estimated cost of equity using the dividend growth model?
ii)what is the estimated cost of equity using the Capital Assets Pricing model?
