7/29/2019 Management of Financial Services_PFS1B

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Paper: Management of Financial Services Code: PFS1B

General Instructions:

The Student should submit this assignment in the handwritten form (not in the typed format)

The Student should submit this assignment within the time specified by the exam dept

The student should only use the Rule sheet papers for answering the questions.

The student should attach this assignment paper with the answered papers.

Failure to comply with the above Four instructions would lead to rejection of assignment.

Specific Instructions:

There are four Questions in this assignment. The student should answer all the four questions. Marks allotted 100.

Each Question carries equal marks (25 marks) unless specified explicitly

Question No 1.

a)   Mr. X paid a premium of Rs. 5 per share for a 6 month call option contract (total of Rs

500 for 100) share of Mohana corporation. At the time of purchase Mohana stock was selling for Rs.

57 per share and the exercise price of the call option was Rs. 56.

i) Determine X’s profit or loss if the price of Mohana’s stocks is Rs. 53, when the option is

exercised.

ii) What is X’s profit or loss if the price of Mohana’s stocks is Rs. 63 when the option is

exercised.

iii) Also calculate the position of seller of Call in both the cases.

What is the difference between Future and Options, explain with example.

Question No 2

a) What will be the theoretical Market price in the case of following events.

a) A company announced as Bonus issue in the ratio of 3:7 and the price on the lastcum date

was 500. what will be the expected price on the Ex-date.

b) In case a right issue is announced when the price on the cum-date is Rs. 500/- and

the right issue was announced in the ratio of 5:7 and the price of RT issue was 300/- .what should be the price on the Ex-date.

c) GMR has gone for a stock split when the price on the last cum date was 850/-calculate the price on the ex-date split in the ratio of 10:1 shares.

b) What is the application of SHARE RATIO Vs TREYNOR RATIO in Mutual funds.

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Question No 3

(a) The financial data of Excellent paper is as follows:

Paid-up capital ( 4 crore, shares) - Rs. 40 crore

Reserves & Surplus - Rs. 160 crore

Profit after Tax - Rs. 18 crore

The shares of the company are listed and are currently quoting at P/E multiple of 12.

The company has taken up an expansion project at a cost of Rs. 355 crore. It proposes to fund it with a termloan of Rs. 155 crore, from ICIC, Rs. 80 crore from internal accruals and the balance by a rights issue. The

right will be priced at Rs. 40 per share (Rs. 30 premium).

You are required to compute

a. The value of the rights;

 b. The market capitalization of the company after the rights issue; andc. Calculate the value of the share after the rights issue.

(b).Explain the difference between Bonus issue & Stock split.

Question No 4

A) Define Record date, book closure date, Cum Dividend Date .

B) Company declared a dividend of Rs 100 on 3rd August’05 Ex dividend date is 16th

August & the record date is 18th august. Date of payment is 30th August. When shoulda shareholder Buy a share in order to get the dividend.