Reference no: EM13518056

Part A:

1. (i) Explain the functions of financial markets.

(ii) Discuss why a dollar tomorrow cannot be worth less than a dollar the day after tomorrow.

2. (i) Explain the cash flows associated with a bond to the investor.

(ii). Discuss the term "price-earnings (P/E) ratio."

3. (i) Discuss capital rationing and soft rationing.

(ii) What are some of the important points to remember while estimating the cash flows of a project?

4. (i) Explain the difference between beta as a measure of risk and variance as a measure of risk.

(ii) Explain the term "security market line."

Part B:

5. (i) Discuss the certainty equivalent approach to estimating the NPV of a project.

(ii) Discuss the problems associated with capital investment process.

6. (i) Contrast and compare capital budgeting and strategic planning.

(ii) What are the agency problems associated with capital budgeting?

7. (i) Discuss the three forms of market efficiency and explain the basis for it.

(ii) Discuss some of the features that would increase the value of a corporate bond?

8. (i) Why there should be a firewall between underwriters and analysts?

(ii) Discuss different ways in which a firm can pay dividends to its shareholders.