Phoenix College of Management

Assignment Test 1
Subject: Corporate Financial Analysis Total Marks: 20 Time: 30 Minutes
* Multiple choice questions: (10*1= 10 Marks)
1. Call Options can be classified as :
(a) European (b) American (c) All of the above (d) None of the above
2. The price of a derivative is dependent on the price of another security, called the _____ .
(a) basis (b) variable (c) underlying (d) options
3. Mr. A buys a Call Option at a strike price of Rs. 700 for a premium of Rs. 5. Mr. A expects the price
of the underlying shares to rise above Rs. ______ on expiry date in order to make a profit.
(a) 740 (b) 700 (c) 720 (d) 760
4. What is the amount an investor will get on a 1-year fixed deposit of Rs. 10000 that pays 8% interest
compounded quarterly?
(a) 12824.32 (b) 13824.32 (c) 10824.32 (d) 11824.32
5. __________ would mean that no investor would be able to outperform the market with trading
strategies based on publicly available information.
(a) Semi strong form efficiency (b)Weak-form efficiency (c)Strong form efficiency(d) All of the above
6. New stocks/bonds are sold by the issuer to the public in the ________ .
(a) fixed income market (b) secondary market (c) money market (d) primary market
7. In a Bond the ____ is paid at the maturity date.
(a) face value (b) discounted value (c) compounded value (d) present value
8. The issue price of T-bills is generally decided at an ______ .
(a) OTC market (b) inter-bank market (c) exchange (d) auction
9. The balance sheet of a company is a snapshot of the ______ of the firm at a point in time.
(a) the sources and applications of funds of the company. (b) expenditure structure
(c) profit structure (d) income structure
10. Markets are inefficient when prices of securities assimilate and reflect information about them.
(a) TRUE (b) FALSE

Short answer questions : (5*2=10 Marks)
1. If a farmer expects to sell his wheat in three months time in anticipation of a harvest. He wants to
hedge his risk, he needs to sell wheat future option now. Why?
2. Why IRR method is more effective than NPV method in valuation of firm?
3. Draw simple Net pay off diagram of Call and Put option.
4. Define all types of efficient market?
5. Write down the advantages of Bond and Stock valuation?