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CMA Final Exam: Strategic Financial Management
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Syllabus for the paper: Section A : Investment decisions 25% 1. Investment Decisions, Project Planning and Control 2. Evaluation of Risky Proposals for Investment Decisions 3. Leasing Decisions Section B : Financial Markets and Institutions 20% 4. Institutions in Financial Markets 5. Instruments in Financial Markets 6. Capital Markets 7. Commodity Exchange Section C : security Analysis and portfolio Management 25% 8. Security Analysis & Portfolio Management Section D : Financial risk Management 30% 9. Financial Risks & Management 10. Financial Derivatives – Instruments for Risk... Show more
CMA Final Exam: Strategic Financial Management
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25 Questions

1. The following is not a feature of Capital Market Line:
2.
3. A firm has sales of ?75,00,000, variable cost of ?42,00,000 and fixed cost of ?6,00,000.It has a debt of ?45,00,000 at 9% interest and equity of ?55,00,000. At what level of sales, the EBIT of the firm will be equal to zero?
4. The rates available in the Kolkata market are: ?/$ Spot 46.75/78;
5. The interest rate in Germany is 11 per cent and the expected inflation rate is 5 per cent. The British interest rate is 9 per cent. How much is the expected inflation rate in Britain?
6. B can earn a return of 18% by investing in equity shares on his own. Now he is considering a recently announced equity based Mutual Fund Scheme in which initial expenses are 1% and annual recurring expenses are 2%. How much should be Mutual Fund earn to provide B, a return of 18%?
7. A call option at a strike price of ?200 is selling at a premium of ?24. At what share price on maturity will it break-even for the buyer of the option?
8. Rate of inflation = 5.1%,
9. The beta co-efficient of equity stock of ARISTO LTD is 1.6. The risk free rate of return is 12% and the required rate of return is 15% on the market portfolio. If dividend expected during the coming year ?2.50 and the growth rate of dividend and earnings is 8%. At what price the stock of ARISTO LTD. Can be sold (based on CAPM)?
10. P Ltd. has an EPS of ?75 per share. Its Dividend Payout Ratio is 30%. Earnings and dividends of the company are expected to grow at 6% per annum. Find out the cost of equity capital if its market price is ?300 per share.
11. An investor buys a call option contract for a premium of ?200. The exercise price is ?20 and the current market price of the share is ?17. If the share price after three months reaches ?25, what is the profit made by the option holder on exercising the option? Contract is for 100 shares. Ignore the transaction charges.
12. If the RBI intends to reduce the supply of money as part of anti-inflation policy, it might
13. A Ltd., an export customer who relied on the interbank rate of ?/$ 46.50/10 requested his banker to purchase a bill for USD 80,000. Calculate the rate to be quoted to A Ltd., if the banker wants a margin of 0.08%.
14. A student ordered a book from USA on 01-05-2018 for $ 90, when the spot rate was ?68.50/$. Payment was made ten days later, on 11-05-2018 when the book was delivered. By this time, the rupee had appreciated by 10%. How much did it cost the student in Rupees? (Ignore transaction and delivery cost).
15. A project had an equity beta of 1.4 and is to be financed by a combination of 25%
Debt and 75% Equity. Assume Debt Beta as zero, Rf = 12% and Rm = 18%.
Hence, the required rate of return of the project is
16. A mutual Fund had a Net Asset Value (NAV) of ?72 at the beginning of the year. During the year, a sum of ?6 was distributed as Dividend.Besides, ?4 as Capital Gain distributions. At the end of the year, NAV was ?84. Total return for the year is:
17. In a constant dividend model, the following estimates the difference between the required rate of return and the growth rate:
18. A ?1,000 per value bond bearing a coupon rate of 14% matures after 5 years. The required rate of return on this bond is 10%. The value of the bond (to the nearest rupee) will be:
19. Initial Investment ?20 lakh. Expected annual cash flows ?6 lakh for 10 years. Cost of capital @ 15%. What is the Profitability Index? The cumulative discounting factor @15% for 10 years = 5.019.
20. Mr. X can earn a return of 18% by investing in equity shares on his own. Now he is considering recently announced equity based mutual fund scheme in which initial expenses are 6.70% and annual recurring expenses are 1.7%. How much should the mutual fund earn to provide Mr. X a return of 18 per cent?
21. A Ltd., an export customer requested his banker B to purchase a bill for USD 80,000.Calculate the rate to be quoted to A Ltd. if B wants a margin of 0.08%, given that the inter bank rate is ? $ 71.50/10.
22. Initial investment of a project is ?25 lakh. Expected annual cash flows are ?6.5 lakh for 10 years Cost of capital is 15%. The annuity factor for 15% for 10 years is 5.019. The Profitability Index of the project will be
23. The following is not a systematic risk.
24. The ratio of current assets (?3,00,000) to current liabilities (?2,00,000) is 1.5: 1. The accountant of this firm is interested in maintaining a current ratio of 2: 1 by paying some part of current liabilities. Hence, the amount of current liabilities which must be paid for this purpose is
25. The following statement is true in the context of rupee-dollar exchange rate with ri denoting interest rate in India and ru denoting interest rate in the US.

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