FINANCIAL TREASURY AND FOREX MANAGEMENT exam notes paper cs professional new
FINANCIAL TREASURY AND FOREX MANAGEMENT exam notes paper cs professional new “Depreciation is a non-cash item of an expense and it is believed to be a source of finance.” - Discuss. (5 marks) (ii) What is credit rating and how does it benefit the investors and the company? (5 marks) (b) Explain the Capital Assets Pricing Model (CAPM). How does it help in the estimation of expected return on security? (10 marks) 2. (a) A factory uses 40,000 tonnes of raw material, priced at ` 50/- per tonne. The holding cost is Rs 10 per tonne of inventory. The order cost is ` 200 per order. (i) Find the EOQ. (2 marks) (ii) Will this EOQ be maintained if the supplier introduces 5% discount on the order lot of 2000 tonnes or more? Identify all the relevant cash flows for this replacement decision. (6 marks) (b) Compute the present value, net present value and profitability index. (6 marks) (c) Find out whether this is an attractive project? (4 marks) 4. (a) Describe the meaning of ‘index futures’. (4 marks) (b) What are the steps taken by financial institutions while appraising the project? How do the financial institutions monitor the projects financed by them? (6 marks) (c) Dhanpat, an investor, is seeking the price to pay for a security, whose standard deviation is 5%. The correlation coefficient for the security with the market is 0.75 and the market standard deviation is 4%. The return from risk-free securities is 6% and from the market portfolio is 11%. Dhanpat knows that only by calculating the required rate of return, he can determine the price to pay for the security. Find out the required rate of return on the security? (a) Venture Capital (b) Role and responsibilities of Treasury Manager (c) Spot contract v. Forward Contract (d) Direct and Indirect Quote.
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