Southpoint School & College

2nd Term Exam-2016

Class: Nine
Subject: Finance & Banking (Creative)
Full Marks:60 Subject Code:
152
Time:1 hours 50 Minutes
Answer any six following the question: Marks

01) Rahim & Rahul are two friends.Both of them are running business in syhet.Last week,they were
discussing about their business with each other. Rahim made an argument with Rahul that there is no
difference between risk & uncertainty. He believed that every investment is risky & that risk arises from
Uncertainty.Where as Rahul said that all uncertainty are not risk & all investments do not inherent risk.
Requirement:
a) What is risk ? 1
b) What do you mean by standard deviation ? 2
c) How does risk & uncertainty differ from each other according to Rahul- explain? 3
d) With whose view you agree Rahin or Rahul ?Justify your answer. 4
02)Following table shows last four years income of Mr.Arman & Mr.Raihan-
Year 1 2 3 4
Armans rate of return 20% 15% -10% 25%
Raihans rate of return 8% 10% 12% 15%
Requirement:
a) A high standard deviation reflects- 1
b) What are the differences between business risk & financial risk? 2
c) Calculate the standard deviation of investment of Mr.Arman.
d) Calculate the standard deviation of investment of Raihan & interpret the result &
compare both the results. 4

03) Small World a juice producing company wants to introduce a new product in the market along with
its existing product. The company has decided to produce Apple juice. Before producing & introducing
the new product, the decision market of the company has collected information regarding the line of new
product.
Requirement:
a) What types of process is capital budgeting ? 1
b) What are the techniques of capital budgeting ? 2
c) In the above step,Which concept of finance is used by Small World to assess new
business potentiality in the market ? 3
d) Capital budgeting deals with long term investment decision Eveluate of statement. 4

04) Benett company a medium sized metal Fabricator,Which has the opportunity to invest in the
following two projects.Project A requires an initial investment of tk.42,000;Projects B requires an initial
investment of tk.45,000.the projected relevant cash flow for the two projects are below:
Year Project-A Project-B
1 14,000 28,000
2 14,000 12,000
3 14,000 10,000
4 14,000 10,000
Requirement:
a) How many steps are there in capital budgeting ? 1
b) How does capital budgeting facilitate fixed asset purchase decision ? 2
c) Calculate the payback period for each project . 3
d) What are the limitations of payback period ? 4
05) Kapor-E-Bangla is famous & popular boutique house situated in Dhaka city. To meet the increasing
demand of the customers,it has been decidedto expand the business in chittagong.The initial investment is
tk.15,00,000.the first three years expected sales will be tk.5,00,000, tk.8,50,000,& tk.10,00,000 respectively.
The expected current cost selling will be 35% of sales and depreciation is 5,00,000per year ,rent of the shop
tk.10,000 per month and income tax rate is 30%.
Requirement:
a) What does IRR stand for? 1
b) How can decision be made from Payback period ? 2
c) Calculate the ARR For Kapor-E-Bangla . 3
d) How could you take decision in selecting the best project on the basis of ARR ? 4
06) Mr.Kamal is a government employee. After retirement, he wants to invest his money that he got from
provident fund.He wants to be such an investor so that he will get certain income at some fixed rate and will
get priority in case of distribution of profit.So he is searching various information about different companies
Where he can invest his money.
Requirement:
a) What is divided ? 1
b) What do you mean by Divided payment ratio policy ? 2
c) Which sources of investment should be wise for Mr.Kamal ? Why ? 3
d) What will be the advantage and disadvantages associated with the selected source of
investment for Mr.Kamal ? 4
07) ABC company Ltd has just sold tk.1,000 per value,20 years bond with a 12% coupon rate.the bond
interest will be paid at the end of each year and the principal will be repaid at maturity.
Requirement:
a) What is cash dividend ? 1
b) What do you mean by limited liability in case of general shares? 2
c) What features have you got about bond from the above stem ? 3
d) Write down the advantages and disadvantages of bond . 4
08) The paid up capital of ABC Textile Mills is 20 million of which General share capital of per share 10 tk
of 10 million , 6% priority share 6 million tk.and the rest is a loan capital of 8% .The company has given
dividend growth rate is 6% and market price tk.150 and corporate tax rate is 35%.
Requirement:
a) What is cost of capital ? 1
b) What do mean by priority share ? 2
c) Calculate the Weighted average cost of capital of ABC company . 3
d) What will happen to the share price of the company if its earnings decline gradually ? 4
09) XYZ Company Ltd has 20 cores general share capital, 10 cores loan capital and 10 cores priority share
capital.the rate of interest of loan is 12% and rate of dividend in priority share is 8% .The Market price of
general share and priority share is tk.255 and tk.110 respectively. The company has given dividend tk. 13
per share to the share holders this year and the dividend has increased at 4% and corporate tax rate is 40%.
Requirement:
a) What do shareholders get from the company ? 1
b) What do you mean by general share ? 2
c) Calculate the Weighted average cost of capital of Xyz company . 3
d) What will happen if a company does not distribute its profit or it retains its profit ? 4
 Southpoint School & College
2nd Term Exam-2016
Class: Nine
Subject: Finance & Banking (Objective) :
Full Marks:40 Subject Code:152
Time:40 Minutes Marks:401=40

01) Which risk may lead a company to bankrupt? 11) As event has an impact on-
a) Liquidity risk b) Business risk a) Profit before interest and tax
c) Financial risk d) Interest rate risk b) Profit after interest and tax
02) Which risk do the investors generally face? c) Net profit d) None of them

a) Liquidity risk b) Business risk 12) Which is the evaluation method of

c) Financial risk d) Interest rate risk investment below ?
03) which types of investment is costly and time a) Capital budgeting b) Time value of money
consuming ? c) Selecting dist.rate d) Future value policy

a) Bond b) Share 13) What is called the difference between cash

c) Insurance d) More inflow and cash outflow ?
04) For what debt instrument is the liquidity risk a) Initial investment b) Cash outflow
Higher ? c) Total current cost d) Total depreciation
a) Bond b) Loan 14) Which one is needed to convert the cash flow
c) debt d) a and c into present value ?
05) What should a company do to maximize its profit? a) Net profit b) Discount rate
a) Maximize profit b) Selling more shares c) NPV d) Cost of capital
c) Extend product d) None of them 15) By dividing average net profit by average
06) Which debt instruments are risk free ? investment, we can find out-
a) Treasury bills b) Treasury bonds a) ARR b) NPV
c) Shares d) a and b c) IRR d) PBP
07) Which are considered as risky returns ? 16) Who bear the responsibility of capital budgeting
a) Treasury bills b) Treasury bonds failure ?
c) Return on equity d) None of them a) Account manager b) Manager
Read the following passage & answer the Question c) Financial manager d) Risk manager
8-11: 17) Capital budgeting is associated with -
X Company issued 5 years bond of 50,00,000 tk.at a) Risky b) Risk free
15% interest rate. the net profit of the company is c) Meaningless d) Successful
Reduced as a result of interest payment. 18) How many steps are involved in capital budgting
08) Which risk is associated with X company? a) 2 b) 3

a) Liquidity risk b) Business risk c) 4 d) 5

c) Financial risk d) Interest rate risk 19) What is the result of wrong investment
09) Every year how how much X company has to decisions ?
pay as interest expense ? a) Increase sales b) Increase Profit
a) Tk.7,50,000 b) Tk.37,96,875 c) Decrease profit d) Increase overall profit
c) Tk.3,75,000 c) Double
10) What is the main reason for reducing net profit? 20) Which is the key to success ?
a) Inability to pay operating expense a) Dividend policy b) Capital
budgeting
 b) Insufficient cash flow c) Financing d) Cost of capital
c) High amount of interest expense
d) Inability to pay the debt

21) Which types of decision is capital ? 31) Who can collect long term funds by issuing bond
a) Risk free decision b) Prime decision and debenture ?
c) Actual decision d) Risk related decision a) Partnership b) Sole proprietorship
Read the following passage & answer the Question c) Company d) Bank
22-24: 32) If A company declared dividend tk.15 of this
The Sami institution has invested capital tk.60,000 in year & assumed dividend increase rate 8% then
a project from which it will get the following cash what would be expected dividend after 5 years?
inflow respectively th.8,000, tk.12,000, tk.25,000, a) 20.43% b) 22.04%
tk.20,000 and tk.20,000: c) 22.25%
d) 23.89%
22) What is cumulative cash flow in 3rd year of the 33)Which one is a disadvantage of priority share
project ? holders ?
a) Tk.8,000 b) Tk.26,000 a) Priority on profit b) Limited liability
c) Tk.45,000 d) Tk.30,000 c) Limited income d) Income in a fixed
23) What will be the pay back time of the project ? 34) In how many types are the shares of companies
a) 2.5 years b) 3.75 years scheduled in the stock exchange classified ?
b) 4.25 years d) 3.50 years a) 2 b) 3
24) What will be the average income of the project ? c) 4 d) 5
a) Tk.20,000 b) tk.17,000 35) Which investment is risky but profitable ?
c) tk.25,000 d) tk.18,000 a) Bond b) Priority share
25) What is called the expected income of the c) Ordinary share d) Debenture
investors in business ? 36) Who are the owners of a company ?
a) Cost of capital b) Rate of profit a) Bond holders b) Priority shareholders
c) Interest of investment d) Source of financing c) Ordinary shareholders d) Debenture holders
26) Nanu Mia starts pharmacy business with 2 lac 37) Why debenture are popular to many investors ?
tk.loan at 12% interest, If tax is 12%, what is his a) For fixed income b) For no mortgage
cost of tax- adjusted loan capital ? c) For fixed cost d) for fixed loss
a) 10.56% b) 12% 38) How priority share holders get dividend ?
c) 13.44% d) 24% a) Permanently b) According to age
27) Sajon borrowed tk.1,00,000 from DBBL at 15% c) At specified rate d) At unspecified rate
interest, the cost of capital is - 39) Sometimes priority shares can be converted into-
a) tk.8,000 b) tk.12,000 a) Ordinary share b) Dividend share
c) tk.1,700 d) tk.1,000 c) Bond d) Debenture
28) XYZ company issued preferred share of 40) Which is the best share for investors who want
tk.1,000,at 10%.If the share price is 900, definite income ?
then the cost of capital is - a) Unexpected share b) Bond share
a) 11.11% b) 12% c) Priority share d) General share
c) 13% d) 10.50%
29) Which one of the following is not a source
of financing ?
a) Owners Capital b) Loan
c) Borrowed fund d) Stolen fund
30) From which source small business cant raise
Funds ?
a) Bank loan b) Money lenders
c) From relatives d) Issuing bonds