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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. An investor buys a call option contract for a premium of ?150. The exercise price is ?15 and the current market price of the share is ?12. If the share price after three months reaches ?20, what is the profit made by the option holder on exercising the option? Contract is for 100 shares. Ignore the transaction charges.
2. A project had an equity beta of 1.2 and was going to be financed by a combination of 30% debt and 70% equity (assume debt beta = 0). Hence, the required rate of return of the project is (assume Rf = 10% and Rm =18%)
3. The required rate of return on equity is 24% and cost of debt is 12%. The company has a capital structure mix of 80% of equity and 20% debt. What is the overall rate of return, the company should earn? Assume no tax.
4. The price of Swedish Krones is $ 0.14 today. If it appreciates by 10% today, how many Krones a dollar will buy tomorrow?
5. A company has expected Net Operating Income
6. 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
7. Presently, a company
8. The following is not a systematic risk.
9. 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?
10. 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%?
11. A project has a 10% discounted pay back of 2 years with annual after tax cash inflows commencing from year end 2 to 4 of ?400 lacs. How much would have been the initial cash outlay which was fully made at the beginning of year 1?
12. A mutual fund wants to hedge its portfolio of shares worth ?10 crore using the NIFTY
Index Futures. The contract size is 100 times the index. The index is currently quoted at 6840. The Beta of the portfolio is 0.8. The beta of the index may be taken as 1. What is the number of contracts to be traded?
13. Mr. Ravi is planning to purchase the shares of X Ltd. which had paid a dividend of ?2 per share last year. Dividends are growing at a rate of 10%. What price would Mr. Ravi be willing to pay for X Ltd.
14. Your customer requests you to book a sale forward exchange contract for US $ 2 million delivery 3rd month. The quotes are: Spot US $ 1= ?48.050/0.060; 1month margin = 0.0850/0.0900; 2 month margin = 0.2650/0.2700; 3 month margin = 0.5300/0.5350.You are required to make an exchange profit of 0.125%. Ignore telex charges and brokerage.
15. For a portfolio containing three securities A, B and C, correlation coefficients ?AB = +0.4; ?AC = +0.75; ?BC = - 0.4; standard deviation sA = 9; sB = 11; sC = 6; weights ? A = 0.2; ? B = 0.5; ? C = 0.3; the covariance of securities A and B is
16. An Indian Company is planning to invest in the US. The annual rates of inflation are 8% in India and 3% in USA. If the spot rate is currently ?60.50/$, what spot rate can you expect after 5 years, assuming the inflation rates will remain the same over 5 years?
17. CNX Nifty is currently quoting at 9100. Each lot is 75. An investor purchases a May Futures contract at 9200. He has been asked to pay 5% margin. What amount of initial margin is he required to deposit? To what level NIFTY futures should in increase to get a gain of 4%?
18. 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?
19. The dollar is currently trading at ?40. If rupee depreciates by 10%, what will be the spot rate?
20. An investor owns a stock portfolio equally invested in a risk free asset and two stocks.
If one of the stocks has a beta of 0.75 and the portfolio is as risky as the market, the beta of the stock in portfolio is
21. A stock is currently sells at ?350. The put option to sell the stock sells at ?380 with a premium of ?20. The time value of option will be
22. In the inter-bank market, the DM is quoting ?21.50. If the bank charges 0.125% commission for TT selling, what is the TT selling rate?
23. The capital structure of a company is as under: 3,00,000, Equity shares of ?10 each; 32000,12% Preference shares of ?100 each; General Reserve ?15,00,000; Securities Premium Account ?5,00,000; 25000, 14% Fully Secured Debentures of ?100 each; Term Loan of ?13,00,000. Based on these, the leverage of the company is:
24. M uses 12% as nominal required rate of return to evaluate its new investment projects.
It has recently been decided to protect shareholders interest against loss of purchasing power due to inflation. If the expected inflation rate is 5%, the real discount rate will be
25. A project had an equity beta of 1.3 and was going to be financed by a combination of 30% debt and 70% equity. Assuming debt-beta to be zero, calculate the project beta and return from the project taking risk free rate of return to be 10% and return on market portfolio of 18%.

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