Casabalance Inc. issued OMR 120,000 10year 9 per cent coupon bonds with a par value of OMR 100. Each bond is convertible into 50 shares of the company shares, which are currently trading at OMR 1.65.

a.What is the conversion price? (1 Mark)

b.What is the conversion premium? (1 Mark)

c.What is the conversion value of the bond? (1 Mark)

12. There are different investments opportunities available to Mr. Khizar. He wants to make a decision after looking at the future outlook of the investments. The riskfree rate of return is 7.7 per cent and the annual premium received on shares over Treasury bills has been 6.5 per cent. Mr. Khizar is considering the following investments.

Project

Beta

Expected return (%)

A

1.36

15

B

1.49

21

C

0.77

15.5

D

0.97

11

Which investments Mr. Khizar should invest? Assume CAPM holds?(3 Marks)

13. a- Calculate the percentage holding period return for a share which is held for six months and sold for OMR 15. The purchase price was OMR 14.40 and dividend of OMR 1 is paid. (1.5 Marks)

b- Snipper buys a car on hire purchase paying five annual instalments of OMR 3,250. Assuming an interest rate of 10 per cent is being charged by the hire purchase company, how much is the current cash price of the car? (1.5 Marks)

14. a- What is significance of working capital management? (1.5 Marks)

b- What is difference between authorized and issued capital? (1.5 Marks)