(a) An investor purchased 300 units of a Mutual Fund at Rs. 12.25 per unit on...

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(a) An investor purchased 300 units of a Mutual Fund at Rs. 12.25 per unit on 31 December, 2009. As on 31st December, 2010 he has received Rs. 1.25 as dividend and Rs. 1.00 as capital gains distribution per unit. Required: (i) The return on the investment if the NAV as on 31st December, 2010 is Rs. 13.00. (ii) The return on the investment as on 31st December, 2010 if all dividends and capital gains distributions are reinvested into additional units of the fund at Rs. 12.50 per unit (8 Marks) (b) XYZ Limited borrows 15 Million of six months LIBOR +10.00% for a period of 24 months. The company anticipates a rise in LIBOR, hence it proposes to buy a Cap Option from its Bankers at the strike rate of 8.00%. The lump sum premium is 1.00% for the entire reset periods and the fixed rate of interest is 7.00% per annum. The actual position of LIBOR during the forthcoming reset period is as under. Reset Period 1 23 LIBOR 9.00% 9.50% 10.00% You are required to show how far interest rate risk is hedged through Cap Option. For calculation, work out figures at each stage up to four decimal points and amount nearest to . It should be part of working notes. (8 Marks) (c) Discuss briefly the key decisions falling within the scope of financial strategy. (4 Marks) (a) An investor purchased 300 units of a Mutual Fund at Rs. 12.25 per unit on 31 December, 2009. As on 31st December, 2010 he has received Rs. 1.25 as dividend and Rs. 1.00 as capital gains distribution per unit. Required: (i) The return on the investment if the NAV as on 31st December, 2010 is Rs. 13.00. (ii) The return on the investment as on 31st December, 2010 if all dividends and capital gains distributions are reinvested into additional units of the fund at Rs. 12.50 per unit (8 Marks) (b) XYZ Limited borrows 15 Million of six months LIBOR +10.00% for a period of 24 months. The company anticipates a rise in LIBOR, hence it proposes to buy a Cap Option from its Bankers at the strike rate of 8.00%. The lump sum premium is 1.00% for the entire reset periods and the fixed rate of interest is 7.00% per annum. The actual position of LIBOR during the forthcoming reset period is as under. Reset Period 1 23 LIBOR 9.00% 9.50% 10.00% You are required to show how far interest rate risk is hedged through Cap Option. For calculation, work out figures at each stage up to four decimal points and amount nearest to . It should be part of working notes. (8 Marks) (c) Discuss briefly the key decisions falling within the scope of financial strategy. (4 Marks)