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FIN 4050

MID SEMESTER EXAM


SUMMER 2015

Time allowed 2 hours


Lecturer: Nicholas Nzioki
INSTRUCTIONS

Answer all the questions


All workings are to be in a Microsoft Excel spreadsheet
Each question should be in a separate worksheet labeled LOAN, SHARES and
BONDS for Questions 1, 2 and 3 respectively.
Make sure that you progressively save your work to avoid possibility of loss.
The work should be saved as StudentID_FirstName. For example if your ID
number is 999999 and your name is Tom, your file will be saved as
999999_Tom
Use formatting functionalities to ensure that numbers and dates are properly
presented for better legibility
Your work should be neat, presentable and creative.
Confirm that the DEVELOPER tab is enabled in the

Question one (40 marks)


Afro_Kenya Ltd a manufacturing company where you are the finance director
wishes to pursue a loan of Ksh. 200 million with a commercial bank. After
approaching the bank manager with your proposal, he has given you a term
sheet with the following terms;
1

ITEM
Loan period

Interest
annum

rate

per

Repayment

4
5

Expected start date


First repayment

TERMS
Minimum 3 years
Maximum 15 years
15% if term is between 3 and 5 years
16% if term is above 5 years up to 8 years
17.5% if term is above 8 years up to 10 years
19% if term is above 10 years
Equal installments computed on a monthly basis.
Interest repayment is highest in the first month and
declines in progression to the last month. Principal
is lowest at start and increases with each month.
17th August 2015
Last day of the month, one month after start date
and every last day of the subsequent month until
maturity (use the EOMONTH function)

The principal and interest are paid off every month for the duration of the
loan.

Required;
Develop a model to display the scheduled monthly loan repayment showing
the following fields;
a)
b)
c)
d)

Loan amount (1 mark)


Loan period in years (Use scroll bar with a range of 3 to 15) (6 marks)
Loan period in months (2 marks)
Interest rate (use the nested IF function to vary the interest as per the
terms) (6 marks)
e) Start date (1 mark)
f) Expected monthly repayment (2 marks)
g) Amortization table
i. Month number (2 marks)
ii.
Sequential date of payment (every last day of the month) (6
marks)
iii.
Principal repayment (6 marks)
iv.
Interest repayment (6 marks)
v. Total repayment (constant amount equal to no. e above) (2
marks)
Note: Only relevant part of the schedule should be displayed at any given
time. For example selection of 3 years should display 36 months only.

Question two (30 marks)


The table below shows the prices of stocks in the Nairobi Securities Exchange
over 10 days, security Beta, P/E ratio and Earnings per share. The same data
has been provided in excel spreadsheet.

Shares data

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Additional information;

The market required rate of return is 13.5%


The Risk free rate or return is 12.2%

Required
a) Add a new column and compute each securitys cost using CAPM (5
marks)
b) Add a new column and compute the market capitalization as at 28th
May 2015 (5 marks)
c) Show the rankings in separate columns each by;
i. P/E ratio where rank 1 is the stock with LOWEST P/E ratio (4
marks)
ii.
EPS where rank 1 is the stock with HIGHEST EPS ratio (4
marks)
iii.
Stock yield. Assume yield is computed by EPS/Market price as at
30th April. Rank 1 = the stock with the HIGHEST yield (6 marks)
d) Using a line graph, show the trend of the two stocks one with the
highest and one with the lowest market capitalization as at 28th May.
The horizontal axis should show the date while the vertical axis should
show the prices for all days between 2nd April and 4th June 2015. (6
marks)

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Question three (30 marks)


Use the following data for four government securities to answer the
questions
Par
Coupon (p.a)
Market rate
Issue date (Settlement date)
Tenor (Years)
Accounting date
Coupon

Bond 1
1000
12%
13.3%
30-Jun-10
10
Next Coupon
date after Today
Semi annually

Bond 2
1000
10%
13.3%
07-Apr-14
12
Next Coupon date
after Today
Quarterly

Required;
a. Tabulate the cashflows for each of the above bonds from issue date to
maturity, including the specific date for each cash flow (12 marks)
b. What is the Net present value of the future cash flows as at the
accounting date? (8 marks)
c. What is the Maturity date of each bond? (4 marks)
d. What is the duration of each of the above bonds if the basis of the
Bonds is Actual/365? (6 marks)

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