Absolute Free CWM_LEVEL_2 Exam Practice for Comprehensive Preparation 

Section C (4 Mark)

Maxis Ltd reported Earnings Per Share of Rs 2.10 in 1993, on which it paid dividends per share of Rs 0.69. Earnings are expected to grow 15% a year from 1994 to 1998, during which period the dividend payout ratio is expected to remain unchanged. After 1998, the earnings growth rate is expected to drop to a stable 6%, and the payout ratio is expected to increase to 65% of earnings. The firm has a beta of 1.40 currently, and it is expected to have a beta of 1.10 after 1998. The Risk Free Rate of Return is 6.25%.

What is the value of the stock, using the two-stage dividend discount model?

Section A (1 Mark)

Depending on how questions are asked, ___________ can cause investors to communicate responses to questions about risk tolerance that are either unduly conservative or unduly aggressive.

Section B (2 Mark)

Amount of liability of payment of gratuity is calculated at the rate of

Section A (1 Mark)

Mr. Sharma is aged 50 years at present. He has invested some amount in an annuity which will pay him after 10 years Rs. 25,000/- p.a. at the beginning of every year for 10 years. Rate of interest is 6% p.a. Calculate how much amount he has invested now?

Section C (4 Mark)

Amit an industrialist wants to buy a flat in a housing society presently costing Rs. 35,00,000/- after 6 years. The cost of the house is expected to increase by 15% p.a for the first 3 years and by 10% in the remaining years. Amit wants to start a SIP with monthly contributions in Birla Front Line Equity Mutual Fund to pay for the down payment of the house which would be 25% of the house value at that time. You as a CWM expect that the fund would give ROI of 14% p.a. compounded monthly in the next 10 years. Please advise Amit the monthly SIP amount starting at the beginning of every month for the next 6 years to fulfill his goal of buying the Flat he desires.