question 1 :In a Private Equity Partnership, whichofthe following characteristics reduce agency issues between General Partners (GPs) and Limited Partners (LPs):

1. GP carried interest in 20% of profits.
2. GP are 'owners'as well as managers.
3. Invested funds are allocated among PE ventures only, thus reducing free cash flow.

IV.GPs who receive ex ante funding only.

A.Ionly

B.IandIIonly

C.I, IIand III only D.I,IIandIVonly E.I,II,IIIandIV

Question2

Northwest Airlines can lease an airplanefor10 years at $20million per year, payable in advance. Northwest's tax rate is 30 percent and it can borrow on a secured basis at 7% before tax. The required (after tax) rate of return on airlines of comparable risk is 10.5%. The appropriate discount rate to calculate the NPV of the lease versus buy decision is:

A. 15%.

B.7%.

C. 10.5%.

D. 4.9%.

E.None of the above.

Question3

Which of the following is NOT true about Infrastructure Project Finance?

1. It is primarily dependent on the credit support of the sponsors.
2. It involves lending with no or limited recourse to sponsors.
3. It involves project financings which can easily reach 15 to 20 years.

D. It seeks to match risks and corresponding returns to the parties most capable of

managing them.

E.It uses financial structures which entail high costs to establish.

Question 4

Which of the following are true about Public Private Partnerships?

I.The government will provide support to the project such as through subsided loans, price guaranteesand/orloans.

Sponsors are generally the project owners but they have no equity stake in the project.

1. The project company seeks customers who are willing to sign off-take agreements.
2. Regional development banks often act as lenders or co-financers.

A.Ionly

B.IandIIonly

C.I, IIand III only D.I, IIIand IV only E.I,II,IIIandIV

Question5

Which of the following is NOT required inorderto compute the Net Advantage of Leasing NAL?

1. The depreciation tax shield.
2. The cost of the leased asset.

3. The lease payment.

4.The lessee's cost of equity.

5.The lessee's after-tax borrowing cost.

Question6

A machine lease callsfor3 year-end payments of $1,400 per year. The machine would cost $3,600 to buy and would be straight-line depreciated to zero salvage value over 3- years. The lessee can borrow at 6%, and the corporate tax rate is 30%.The Net Advantage of Leasing (NAL) is closest to:

A. $104.50

B.-$104.50 C. -$1,265.50 D. $890.50

E.$1,265.50

Question7

Suppose Grail's share price is currently $50. In the next six months it will either fall to $40 or rise to $60. The six-month risk-free interest rate is 2% (6 month periodic rate). The current value of a call option (on the share) with six-months to expiry and an exercise price of $50 is closest to:

A. $5.39 B. $15.00 C. $8.25 D. $8.09 E. $5.99