ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Busness A!mnstraton"

ASSI#NMENT No$ %
&ourse' (nan)a* Mana+ement (,-%." Semester' Sprn+ /0%1
Le2e*' MBA (.3 Years 4 /3 Years" 4 M$&om
Q. 1 Discuss in detail the role of financial markets in moving funds from the savings
sector to the investment sector of Pakistan. (/0"
Q. 2 (a) Mahir Co. has total annual sales (all credit) of Rs.8! and a gross "rofit
of # "ercent. $ts current assets are Rs.1%!! Current lia&ilit' are
Rs.12!! $nventories are Rs.%! and Cash are Rs.2!.
(i) (o) much average inventor' should &e carried if management )ants the
inventor' turnover to &e 8*
(ii) (o) ra"idl' must accounts receiva&le &e collected if management )ants
to have an average of Rs.1! invested in receiva&les* (%0"
(&) Discuss in detail the &enefits that can &e derived &' the firm from "re"aring
cash flo) statement of a 'ear. (%0"
Q. + ,hmed has decided to start saving for his retirement. -eginning on his t)ent'.first
&irthda'! he "lans to invest Rs.2! each &irthda' into a savings investment
earning a / "ercent com"ound annual rate of interest. (e )ill continue this savings
"rogram for a total of 1 'ears and then sto" making "a'ments. -ut his savings
)ill continue to com"ound at / "ercent for +0 more 'ears! until he retires at age %0.
Rohila also "lans to invest Rs.2! a 'ear! on each &irthda'! at / "ercent! and )ill
do so for a total of +0 'ears. (o)ever! she )ill not &egin her contri&utions until her
thirt'.first &irthda'. (o) much )ill ,hmed1s and Rohila1s savings "rograms &e
)orth at the retirement age of %0* 2ho is &etter off financiall' at retirement! and &
ho) much* (/0"
Q. # (a) 3he stock of (ealth Cor"oration is currentl' selling for Rs.2 a share and is
e4"ected to "a' Rs.1 dividend at the end of the 'ear. $f 'ou &u' the stock
no) and sell it for Rs.2+ after receiving the dividend! )hat rate of return 'ou
)ould earn* (0,"
(&) Ravi $ndustries &ond has a 12 "ercent cou"on rate and Rs.1! face value.
$nterest is "aid on annual &asis! and the &ond has 1 'ears to maturit'. $f
investors re5uire a 1# "ercent 'ield! )hat is the &ond1s value* 2hat is the
effective annual 'ield on the &ond* (%/"
Q. 0 Consider the follo)ing information6
State of Pro5a5*t6 of State Rate of Return
E)onom6 of E)onom6 f state o))urs
A B &
Recession .20 .% .0 .2
7ormal .+ .11 .8 .11
-oom .#0 .21 .1# .+0
(a) 2hat is the e4"ected return on an e5uall' )eighted "ortfolio of these three
stocks* (%/"
(&) 2hat is the variance of a "ortfolio invested # "ercent each in 9tock , and
9tock C! and 2 "ercent in 9tock -. (0,"
2

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