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POST MID TERM

ASSIGNMENT OF
FINANCIAL
MANAGEMENT

SUBMITTED TO
PROF. SUJOY KU. DHAR

SUBMITTED BY
RITIKA PAUL
Q1. Which of the following is not the role of SEBI and not related to its principal tasks ?

a) Regulate the business in stock exchanges and any other securities markets.
b) Register and regulate the capital market intermediaries.
c) Promote and regulate self-regulatory organisations.
d) Formulates and implements monetary and credit policy.

Q2. If the nominal rate of interest is 16% per annum and there is quarterly compounding then
effective rate of interest will be:

a) 16.98%
b) 16.88%
c) 17.00%
d) 16.50%

SOLUTION:

𝑘 𝑚
𝑟 = (1 +
) −1
𝑚
𝑟 = 𝑒𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒
𝑘 = 𝑛𝑜𝑚𝑖𝑛𝑎𝑙 𝑟𝑎𝑡𝑒
𝑚 = 𝑛𝑜. 𝑂𝑓 𝑡𝑖𝑚𝑒𝑠 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑖𝑛 𝑎 𝑦𝑒𝑎𝑟

0.16 4
= (1 + ) −1
4
= 16.98

Q3. Rate of return which is asked by the investors is classified as:

a) Weighted average cost of capital.


b) Mean cost of capital.
c) Weighted cost of capital.
d) Average cost of capital.

Q4. Which of the following is incorrect about Red Herring Prospectus?

a) It should contain all necessary information such as total issue size, face value of the shares,
name of the investment bankers managing issue.
b) It should contain address of the registered office of the company.
c) The financial statement and risk faced by the company is also mentioned.
d) The issue price and price band are given on the prospectus.

Q5. What will be the return on portfolio?

Calculate from given information:

Expected return from security 1 is 20%, security 2 is 30% and from security 3 is 10%.
The portfolio proportions invested in these securities are 0.1, 0.2 and 0.3 respectively on security1,
security2 and security3.

a) 11.11%
b) 11.00%
c) 10.50%
d) 10.80%

SOLUTION:

𝑅𝑃= 𝑅1 𝑊1 + 𝑅2 𝑊2 + 𝑅3 𝑊3

= 20 ∗ 0.1 + 30 ∗ 0.2 + 10 ∗ 0.3

= 11%