ACC501 BUSINESS FINANCE MIDTERM full papers FALL 2011

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Question No: 17 ( Marks: 3 )
What is underwriting contract? Discuss in detail.
Question No: 18 ( Marks: 3 )
How much an investor has to invest a lump sum amount in order to have Rs.3 million in 20 years from now if the rate of interest is 16 % compounded quarterly?
Question No: 19 ( Marks: 3 )
Draw a time line for the annuity due of Rs.900 for 6 years. Also, describe the relationship between an ordinary annuity and annuity due with the help of equation.
Question No: 20 ( Marks: 3 )
Mr. Martin is considering the purchase of land for Rs.650, 000, which may be sold for Rs.850, 000 in 7 years. If the discount rate is 16% compounded quarterly, will this be a good investment?
Question No: 21 ( Marks: 10 )
Mr. Imran has Rs.150, 000 in cash that he can deposit in any of four savings accounts in four different banks for a 7 year period. Bank A compounds interest on an annual basis; Bank B compounds interest twice each year; Bank C compounds interest each quarter and Bank D compounds interest on daily basis. All four banks have a stated annual interest rate of 12%.
Required:
a. What amount would Mr. Imran have at the end of 7th year in each bank?
b. What effective annual interest rate would he earn in each of the four banks?
c. On the basis of your findings in a and b, which bank should Mr. Imran deal with? and Why?

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