FINAL EXAM

Spring - 2021
Department / Total
Program Semester Course Title Instructor Issue Date Time
Faculty Marks
Faculty of Introduction
4th 28th July
Management BBA to business Ms. Zohra 24 hours 40
Semester 2021
Sciences (FMS) Finance

Q# 01: You expect a share of stock to pay dividends of 1, 1.25 and 1.50 in each of the next 3 years. You
believe the stock will sell for $ 20 at the end of the 3 rd year. (05 Marks)

i. What is the stock price, if the discount rate for the stock is 10 %?
ii. What is the dividend yield?
Q# 02: Cincinnati Company has decided to put $30,000 per quarter in a pension fund. The fund will earn
interest at the rate of 6% per year, compounded quarterly. Find the amount available in this fund after 10
years. (05 Marks)

Q# 03: Waterworks has a dividend yield of 8 percent. If its dividend is expected to grow at a
constant rate of 5 percent, what must be the expected rate of return on the company’s stock?
(05 marks)
Q# 04: You decide to put $12,000 in a money market fund that pays interest at the annual rate of 8.4%,
compounding it monthly. You plan to take the money out after one year and pay the income tax on the
interest earned. Using it as the growth rate, the future value of money after twelve months is?
(05 marks)
Q# 05: A bond has a coupon of 6.5% and it pays interest semiannually. With a face value of $1000, it
will mature after 10 years. If you require a return of 12% from this bond, how much should you pay for
it? (04 Marks)

Q# 06: Albert Company bonds, with current yield 12%, will mature after 10 years. The coupon rate of
these bonds is 10%. Calculate their market price and the yield to maturity. (04 Marks)

Q# 07: Two stock prices for four days are given below:

Price of Stock A Price of Stock B

25 55
29 60
33 61
30 63
Calculate: (06 marks)
a) Average price of both Stock.
b) Average return of both Stock.
c) Coefficient of Variation of both Stock.

Q# 08: Medical Experts Inc. is considering to contract an outside company to supply medical equipment
for its clients. Medical Experts' managers want to make a decision of choosing between two suppliers
who will be contracted for a period of 4 years. The following are the details of the two options:

Supplier Initial Investment Annual Cash Flow Period in years

Supplier 1 $150,000 $50,000 4

Supplier 2 $100,000 $25,000 4

Please answer the following questions: (06 Marks)

 a. What is the Payback period for each of the two options?

 b. What is the Net Present Value for each of the two options if the expected rate of return is 10%?

  c. Which supplier do you think Medical Experts Inc. should choose?