MANIPAL ACADEMY OF HIGHER EDUCATION
WILP - MBA (BANKING & FINANCE) – VII & VIII TERM
EXAMINATION – JANUARY / FEBRUARY 2025
SUBJECT: WMB 608 - FINANCIAL MANAGEMENT (DTQ)
Saturday, February 01, 2025
Time: 09:00 – 11:00 Hrs. Max. Marks: 50
Answer ALL the following questions:
1. Briefly explain the goals of financial management.
2. A portfolio consists of 35% Microsoft stock, 35% Amazon stock, and 30% GE stock.
Microsoft has a beta of 1, Amazon has a beta of 3.0 and GE has a beta of 0.5.
Treasury bills (the risk free asset) currently offer a return of 4% and the expected return on
the market is 11%.
• What return should you expect on your portfolio according to the CAPM?
3. Calculate the payback period for the following data and suggest which is the better project
basing your decision on the payback period.
Year Project 1 Project 2
0 -100000 -125000
1 20000 35000
2 40000 40000
3 25000 50000
4 35000 45000
5 15000 46000
4. Define:
a) Forward
b) Future
c) Option
5. The cost of specific sources of capital for Bharath Nigam Limited are:
Re = 15%
Rp = 12%
Rd = 11%
The capital structure is as follows:
• Equity – Rs 1500000
• Preference – Rs 600000
• Debt – Rs 900000
• Tax rate - 30%
Calculate WACC
(3 Marks x 5 Questions = 15 Marks)
6. Write a short note on :
6a. Initial Public Offering (IPO) and Follow on public offer (FPO)
6b. Private placement and preferential allotment
6c. Preference shares
6d. Venture capital
6e. Debenture
(2 Marks x 5 Questions = 10 Marks)
WMB 608 E24-110 Page 1 of 2
7a. Mr. Shrava has two assets, namely, Alpha and Beta. Which option should he prefer and,
why?
Alpha
Market Expectation Probability Return
Pessimistic 0.25 15%
Most Likely 0.6 9%
Optimistic 0.15 20%
Beta
Market Expectation Probability Return
Pessimistic 0.3 10%
Most Likely 0.4 15%
Optimistic 0.3 8%
7b. Explain the sources of risk.
(5 Marks + 5 Marks = 10 Marks)
8a. Calculate the duration of the two bonds. Using the following information.
Particulars Bond 1 Bond 2
Face value Rs 1000 Rs 1000
Coupon rate 8% Zero-coupon
Years to maturity 7 7
Redemption Value Rs 1000 Rs 1000
Current market price Rs. 902.63 Rs 513.16
Yield to maturity 10% 10%
Suggest which is the better bond to invest basing your decision on the duration of bonds.
8b What is the money market? Explain any three money market instrument?
(10 Marks + 5 Marks = 15 Marks)
WMB 608 E24-110 Page 2 of 2