Reference no: EM13870106
Q1. Explain the followings
a. Time Value of money and its importance in the field of Finance
b. The rule of 72 with an example
c. Annuity and perpetuity
Q2. Solve the followings.
a. Mohammad Khalid is planning to invest $10,000 in a bank fixed deposit for 5 years. The bank promises to pay 9 percent interest rate on the deposit. What is the
future value of Mr. Khalid investment?
b. You are planning to buy a BMW sports car next year. You predict the car will cost $ 50,000. If your bank pays 5 percent interest on your savings, compounded annually, how much will you need to deposit today to have $50,000 after one year?
c. Suppose that a firm deposits $ 5,000 at the end of each year for four years at 6 percent rate of interest. How much will be the value of this annuity at the end of fourth year?
Q3. What are two components of a total holding period return? Mr. Jamil buys a stock for $30.00. After one year, the stock price becomes $ 35.00 and he receives a dividend of $0.80. Calculate his total return for the period.
Q4. Define expected return. From the following information calculate expected rate of return for the stock ‘X'.
Probability ( chances) of return

Return in % for X

.1

8

.2

10

.4

8

.2

5

.1

4

Q5. Discuss Capital Asset Pricing model (CAPM). Calculate the expected rate of return for a stock from the following information.
Risk free rate= 10%
Expected return on market=18%
Beta of the stock=1.35
4. Discuss diversifiable(unsystematic risk) and nondiversifiable risk( Systematic risk)
5. Discuss features of corporate bonds and also discuss types of bonds.