Fin630 VU Midterm Current Paper (May 2011)

Fin630

 

Question No: 31 ( Marks: 3 )
Why you as invester would prefer investing in money market mutual funds(3)

SOLUTION
• Money market mutual funds invest in portfolio of money market securities.
1. Taxable or tax-exempt.
2. Commercial paper important investment.
3. Average maturity limit: 90 days.
4. Investors pay a management fee but not a sales or redemption charge (load).
5. Not insured by the federal government
Question No: 32 ( Marks: 3)
RELATIONSHIP OF INTREST RATE WITH …
Question No: 32 ( Marks: 5 )
1 QUESTION IS ABOUT FUNDANMENTAL ALANYSIS MARKS 5
Question No: 32 ( Marks: 5 )
A company is paying $0.60 in dividends and the required rate of return is 6%.Company is selling Paper copy forum vu thirty nine dot com the stocks at $12. Assume 2% growth rate. Figure out the current value of the stock.By keeping in view your answer. Explain whether the stock is overvalued or undervalued.
SOLUTION
Po=D1(1+g)/(k-g)
D1=0.6
P=12
G=2%
RRR(k)=6%
Po=?
=0.6(1+0.02)/(0.06-0.04)=15.3
P=12
While Po=15.3
It means stock is undervalued.

 

Another Paper:

 

Total 32 Questions
28 Mcqs & 4 subjective

Q: A company is paying $0.60 in dividends and the required rate of return is
6%. Company is selling the stocks at $ 12. Assume 2% growth rate. Figure out
the current value of the stock. By keeping in view your answer. Explain
whether the stock is overvalued or undervalued.
Q: Outline the rationale for sector rotation?
Q: Why it is difficult to classify industry?
Q: Define Return on Equity (ROE)?