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MGT201 - Financial Management

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    MGT201 Past Papers

    Financial Management - MGT201 Spring 2005 Final Term Paper.pdf
    MGT201 Orignal Solved Final Term Papers Made By Waqar Siddhu 1.pdf MGT201 ImportantMCQs_For_Finalterm-By_AsadMunir.pdf Financial Management - MGT201 Fall 2004 Final Term Paper.pdf Financial Management - MGT201 Spring 2006 Final Term Paper.pdf 3_MGT201 FINAL TERM PAPER SOLVE BY KASHIF.doc
    Financial Management - MGT201 Spring 2010 Final Term Paper Session 2.doc
    Financial Management - MGT201 Spring 2010 Final Term Paper Session 3.doc

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    @zareen said in MGT201 Assignment 1 Solution and Discussion:

    Re: MGT201 Assignment 1 Solution and Discussion

    Assignment #01Marks =20
    Risk, Return and Investment Decisions Investment decisions are supported by various factors including investor choice of risk appetite, return on investment and most important the market situation that is backed by supply and demand forces. The supply and demand impact is reflected in the market price of securities and guide investors to take a rational decision.Along with market forces, company specific information is also helpful in determining the fair price of an investment. Rational investor s consider both market and company specific information to choose among different investment options. Following information is available for the three stock and you have to choose the two from the three securities to construct a portfolio.
    Required:Calculate required rate of return for three stock using SML Equation,if risk free rate of return is 10%.Calculate Fair value of three stocks using Gordon Growth Model.Based on fair price calculation, identify whether the stocks are undervalued or overvalued, justify your answer with reasoning.Considering the above calculations,if you want to construct the portfolio of two stock from the above mentioned three stock., which two stocks you will add in your portfolio and why?NOTE: Formula and complete working is mandatory in each part, provide complete calculations in order to avoid marks deduction.IMPORTANT NOTE: 24 hours extra / grace period after the due date is usually available to overcome uploading difficulties. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.
    IMPORTANT INSTRUCTIONS/ SOLUTION GUIDELINES/ SPECIAL INSTRUCTIONS DEADLINE:• Make sure to upload the solution file before the due date on VULMS• Any submission made via email after the due date will not be accepted FORMATTING GUIDELINES:• Use the font style “Times NewRoman” or “Arial” and font size “12” • It is advised to compose your document in MS-Word format • You may also compose your assignment in Open Office format • Use black and blue font coloronly RULES FOR MARKING Please note that your assignment will not be graded or graded as Zero (0), if:• It is submitted after the due date.• The file you uploaded does not open or is corrupt.• It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF etc. • Not submitted as per given format • It is cheated or copied from other students, internet, books, journals etc. Note related to load shedding:Dear students, As you know that semester activities have started and load shedding problem is also prevailing in our country. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments or GDBs. Best of Luck!!

    Answer 1
    Required rate of Return of Stock A
    r A = r RF + (r M – r RF ) β A
    = 10% + (12% - 10%) 0.5
    = 11%

    Required rate of Return of Stock B
    r B = r RF + (r M – r RF ) β B
    = 10% + (13% - 10%) 1.5
    = 14.5%

    Required rate of Return of Stock C
    r c = r RF + (r M – r RF ) β C
    = 10% + (12.5%-10%) 1
    = 12.5%

    Answer 2
    Fair Price of Stock A
    Po* = DIV1 / [(r RF + (r M – r RF) A) - g]
    = 5/ [(10% + (12%-10%) 0.5)-4%]
    5/7%=R s 71.43
    Fair Price of Stock B
    Po* = DIV1 / [(r RF + (r M – r RF) B) - g]
    = 3/ [(10% + (13% - 10%) 1.5) – 6%
    = 3/ 8.5%= R s 35.29
    Fair Price of Stock C
    Po* = DIV1 / [(r RF + (r M – r RF) C) - g]
    = 6/ [10% + (12.5%-10%) 1) – 2%
    = 6/10.5%= R s.57.14

    Answer 3
    Stock A is Undervalued as the fair price is more than the market price.
    Stock B is Overvalued as the fair price is less than market price.
    Stock C is Undervalued as the fair price is more than the market price.

    Answer 4
    The Stock A and Stock C should be used to construct the portfolio because of two reasons as the beta of Stock A and Stock C is less than Stock B. The required rate of return of Stock A is less than its market rate of return and required rate of return of Stock C is equal to its market rate of return while the required rate of return of Stock B is more than its market rate of return.

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    Grand Quiz Syllabus and Schedule
    Dear Students,

    Due to the prevailing circumstances, Grand Quiz will be conducted to replace Proctored Mid-Term Exam in this course of MGT201. You can attempt Grand Quiz within 24 Hours. So it is advised to be proactive since there will be no extension.

    Number of Questions 30 Weightage 20% Types of Questions MCQs Opening Date Dec 28, 2020 at 12:00 AM Closing Date Dec 28, 2020 at 11:59 PM Lessons Video Lecture 1-22

    Special Instructions

    You must attempt your Grand Quiz effectively as it is being held as your mid-term exam and it would be equivalent to 20% of the overall course weightage.

    You can start attempting the quiz at any time but within given date(s) by clicking the quick link for Quiz on VU-LMS as it will become enabled within the mentioned dates. As soon as the time will be over, it will automatically be disabled and will not be available to attempt it.

    Please note that some questions of the quiz may require some computation as well. So plan your course preparation accordingly.

    Each question has maximum time limit of 90 seconds to attempt and save. So, you have to save your answer before 90 seconds. But due to unpredictable/unstable Internet speed, it is strongly recommended that you save your answer within 60 seconds to avoid any inconvenience. While attempting a question, keep an eye on the remaining time.

    Attempting quiz is unidirectional. Once you have moved forward to the next question, you will not be able to go back to the previous one. Therefore, before moving to the next question, make sure that you have selected the best option and have saved your answer.

    DO NOT press back button of your browser or refresh the page while attempting a question. Otherwise you will lose the chance of attempting the current question and a new question will be loaded.

    DO NOT try to disable “Java Script” in your browser; otherwise you will not be able to attempt the quiz.

    If for any reason, you lose access to Internet (like power failure or disconnection of Internet); you will be able to attempt the quiz again but from the next question where you left in the last attempt. But remember that you have to complete the quiz before expiry of the deadline.

    Stay Safe & Healthy
    Best of Luck!

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    Asmara ButtA


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    @zareen said in MGT201 Quiz 1 Solution and Discussion:

    Which of the following document/s is/are used to prepare a financial plan?

    A financial plan documents an individual’s long-term financial goals and … The following steps in creating a financial plan may, of course, … You can’t create a financial plan without knowing where your money is … Don’t overlook cash withdrawals that may be used on sundries from shampoo to sodas.

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    @Love-Uzair said in My Question is about mortgage bound?:

    mortgage bound Ka koi example btae… Land ki ilawa…?

    Mortgage bonds are backed by real assets that may include land or home mortgage.

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    Money market is a place where short term debt instruments are traded the volume of transaction is large while number of transactions are small. For example certificates of deposits and commercial papers are traded in money market.

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    @Fouzia-Suleman said in MGT201 Assignment 1 Solution and Discussion:

    IA new investor wants to add bonds and shares in his portfolio and he has two options available with the following information.
    I. Company ABC issued a five-year bond with face value of Rs.1,000. The bond offers 12% semiannual coupon payment. The market interest rate for such type of investment is 14% per annum while current market price of bond is Rs.940.
    II. The stock of company XYZ is being sold at Rs.54 per share while the forecasted dividend is Rs.6 for first year and Rs.7 for the second year. The price of the stock after year 2 is expected to be Rs.55. The Company paid most recent dividend as Rs.5 whereas the rate of return for such type of investment is 14% per annum.
    You are required to help the investor in valuation of both investment options by calculating:

    Intrinsic value of the bond. (8 marks)
    Intrinsic Value of stock today. (8 marks)
    Identify either bond and stocks are overvalued or undervalued. Justify your answer with proper calculation and reasoning. (4 Marks)

    Marks 20

    Intrinsic value of the bond
    Po=Σ Ct/ (1+r/2)n + Par/1+r/2)n
    C = coupon payments = 100012/100 = 120/2 = Rs.60
    No. of coupon payments = 52 = 10 (semi-annual) Required rate of return: 14/2 = 7% (semiannual)
    = 60Annuity factor (7%,10) + 1,000 * PV factor (7%, 10) = 60{1-1/ (1+0.14/2) 52) / (0.14/2)} + 1,000/ (1+ (0.14/2)5*2 = 60{1-1/ (1+0.07)10 /0.07} + 1,000/ (1+0.07)10
    = 421.41+ 508.35
    = Rs. 929.76

    Intrinsic value of the stock
    Do = Current dividend = Rs.5 D1 = Rs.6
    D2 = Rs.7
    Value of Stock:
    Po = D1/ (1+i)n + D2/ (1+i)n + P2/(1+i)n Po = 6/ (1.14)1+ 7/ (1.14)2 + 55/ (1.14)2 Po = 5.26+5.39+42.32
    Po = Rs.52.97
    Bond and Stock valuation Solution

    Overvaluation or undervaluation of securities
    For Bond
    Bond is overvalued because market price is more than intrinsic value i.e. Market price > Intrinsic value
    940 > 929.76
    For Stock
    Stick is also overvalued as its market price is more than its intrinsic value i.e. Market price > Intrinsic value
    54 > 52.97

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    @Rabeiea-Aslam said in MGT201 GDB 1 Solution and Discussion:

    Option 1:
    Investing Rs. 100,000 at 12% interest rate compounded semiannually for 10 years
    Option 2:
    Depositing half of investment amount in a saving account for 10 years that pays 10 % interest rate compounded annually and investing remaining half amount at 12% interest rate compounded annually for 10 years.

    Calculation of both Option
    Option 1:
    Semi Annual Yearly Compounding
    FV = PV x (1 + i/2) 2n
    FV = 100,000 x (1 + 0.12/2) 2 x 10
    FV = 320713.5

    Option 2:
    FV= PV (1 + i) n
    FV = 50,000 (1+0.12) 10
    FV = 155292.4
    Option 1 is best for Mr. Ahmad because the value of FV is grater than Option 2

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    @zaasmi said in Lecture # 2 Discussion:

    What is the difference between fair value and intrinsic value?

    Intrinsic value is an anticipated value that is based on the fundamental analysis, the amount a rational investor is willing to pay for a security at a given level of risk. This fundamental or intrinsic value is based on discounted value of future cash flows attached with that security.

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    @zaasmi said in MGT502 Handouts:

    please explain intrinsic value with example

    Answer: Intrinsic value/face value/par value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors. This value may or may not be the same as the current market value.

    Face value / par value refers to the stated value of the instrument at issuance. Market value, on the other hand, refers to the actual price investors pay for these securities. The par value is determined by the issuing entity and remains unchanged over time, but the market value is highly fluid and is dedicated by the psychology of the marketplace.

    So par value of shares is the original value or the value that is determined at the time of issuance of shares while market value is the recent market price of shares in which shares can be bought/purchase.

    Feel free to contact if there is something ambiguous.

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    Under “cliental effect”, ________ investors invest in high dividend stocks while __________investors invest in low dividend stocks. MGT201
    Income, growth

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    Idea Solution:

  • SML Graph & CAPM

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