LONG EXAM : CAPITAL MARKETS NAME: _______________________ SECTION: ____________________

SCORE: ________

I. ESSAY QUESTIONS: Answer the following essay question in the yellow pad. Be logical, straight-to-the-point, and concise with your answers. 15% 1. A Filipino investor who purchases the bonds issued by the UK government made the following comment: Assuming that the British government does not default, I know what the cash flow of the bond will be. Explain why you agree or disagree with this statement. 2. A Filipino investor who purchases the bonds issued by the Philippine government made the following statement: By buying this debt instrument I am not exposed to default risk or purchasing power risk. Explain why you agree or disagree with this statement. 3. You just inherited 10,000 shares of a company you have never heard of Tisyu Corporation. You call your broker to find out if you have finally struck it rich. After several minutes, your broker comes back on the telephone, and says, I dont have a clue about these shares. Its too bad they are not traded in the financial market (ex. PSE); that would make life easier for you. What does she mean by her statement? II. PROBLEM SOLVING: Show your computations in the yellow pad and put a box on your final answers. Partial points are 3 points only. (45%) Question 1: In January 2013, Mr. A offers to sign a lease paying a rent of P5,000 per month to ABC Corporation, in advance - the rent will be paid at the beginning of each month, for five years. At 10% risk free rate, what is the present value of this lease? Question 2 and 3: In January 1, 2013, youve just joined the banking firm of Security Bank Corporation. Theyve offered you two different salary arrangements. You can have P75,000 per year for the next two years, or you can have P64,000 per year for the next two years, along with a P20,000 signing bonus today. The bonus is paid immediately, and the salary is paid in equal amounts at the end of each month. If the risk free rate is 10 percent, What is the present value for Option1 ? (Question 2) What is the present value for Option2? (Question 3) Question 4: In January 1, 2013, Mr. A deposited at BDO an initial investment of P2,000, he let the P2,000 compound including its interest of 10% per year. With continuous compounding for 30 years, how much is the value of Mr. As P2,000 investment in Dec. 31, 2043? Question 5: Mr. C is considering investing in a zero-coupon bond that sells for P250,000. At maturity in 16 years it will be redeemed for P1Million. What is the annual risk free rate?
**Meaning of zero-coupon: no yearly interest payment.

Question 6: On July 15, 2013, what is the market capitalization of a Company that has Assets of P2.5Million, Liabilities of P5.6Million, Sales of Php12Million, with 150,000 shares. Market price per share is as follows: January 1 : P11.78 ; June 15 : P14.50; July 15 : P10.67 ; Aug 15: P11.13. Question 7: SM bought Php7.5 Million commercial debt issued by Ayala Corporation last January 1, 2009 (issuance date). Yearly Bond interest: 10% end of the year. Risk free rate: 3%. Term to maturity is 15 years from issuance date. What is the value of the commercial paper that SM bought during January 1, 2009? Question 8: Related to the question above, what is the value of the commercial paper that SM bought as of December 31, 2014? Question 9: Related to Question 8, at the end of 15 years, how much is SMs profit from the commercial paper investment?

*Please staple this questionnaire to your yellow pad before passing.