Solve the following questions.
L MARKETS a) Distinguish between the terms " cum div" and "ex - div" as used in financial markets QUESTION 10 JUNE 2009 QUESTION ONE A a) Explain the main factors behind the rapid development of capital markets in your country. QUESTION 11 a) DECEMBER 2006 QUESTION SIX Discuss the role of a capital markets authority in the development of a country's financial market VE A QUESTION 12 SIX a) Describe the benefits to a country of integrating its financial markets with those of other country Lets QUESTION 13 a ) Distinguish between primary and secondary securities market. b ) "Despite the large investment in the stock exchange and the various government incentives, only a few companies are listed at the stock exchange of the three East Africa Countries". This was the market." opening remark by the guest speaker in a seminar whose theme was "Developing our capital Required: i ) The advantage of being listed at the stock exchange. i) Highlight four factors that may hinder companies from being listed at the stock exchange. QUESTION 14 a) Briefly explain how the "Dow theory " views the movement of the market prices of shares traded on a stock exchange b) Identify and briefly explain the factors that must be taken into account in the design and construction of a market index for shares c) Joseph Kimeu is trying to determine the value of Bidii Ltd's ordinary shares. The earnings growth rate over his planned six-year holding period is estimated to be 10% and the dividend payout ration in 60%. The ending price earnings (P/E) ration is expected to be 20 and the current earning per share are Sh. 4. The required rate of return for this share is 15%. Required Compute the market price of Bidii Ltd's ordinary share QUESTION 15 a) Briefly describe the three forms of capital markets efficiency. b) Highlight four factors that may underlie the low rate of listing of companies in a stock exchange you are familiar with. QUESTION 16 (a Highlight four advantages and disadvantages to a company of being listed on a stock exchange (b) In relation to the stock exchange" section 3 F.MVALUATION OF FINANCIAL ASSETS RE QUESTION 18 3) Utanisi Lid. is experiencing a period of rapid growth, Earnings and dividends are expected grow at the rate of 15% per annum during the next two years, 13% in the third year and i y constant rate of 6% per annum thereafter, The last dividend paid by the company was she jk The company's required rate of return is 12% Required: The value of the equity shares of the company today. The dividend yield and capital gains yield and total return for year I and year 2. b) Pentagon Lid. issued a 10 year bond two years ago. The bond has a coupon rate of 13% pet payable semi annually. Upon inaturity, it will be redeemed at sh. 102 for every Sh. 100 par. Required: The highest amount you can pay to acquire the bond today if the required rate of return is 14% DECEMBER 2010 QUESTION ONE B HAVE QUESTION 19 c) PDS Lts. is a medium sized company quoted on the stock exchange . The company's year end by December . The following data relate to the company's earnings per share(EPS) and dividend share (DPS)for the last five years. Year ended 31 December: 2009 2008 2007 2006 2005 EPS (Shs) 14.0 13.6 13.1 12.7 12.2 DPS (Shs) 8.2 8.1 7.9 7.8 7.7 If the current dividend policy is maintained the directors of PDS Ltd. expect that annual growth earnings and dividend will be the same as the average growth in earnings over the past four years PDS Ltd which is wholly equity financed is reluctant to obtain debt to finance its growth opportunities. The company is therefore considering a change in its dividend policy where 50% its earnings will be retained to finance identified projects which are estimated to have an average post tax return of 15% The company's cost of capital is 12% Required: The share of the company which might be expected by the market 1) If the company does not announce the change of dividend policy If the company announces the change in dividend policy DECEMBER 2010 QUESTION ONE Bar QUESTION 20 b) Ushindi Lid, has recently issued a sh. 1,000, 9 percent convertible bond. The bond can be converted into 9 ordinary shares at the end of the five years. The current market price of the sha Section 3 F.MQUESTION 1 25 points Save Answer Select the correct word(s) from the drop down menu to finish the following sentences: Central Park in New York City is an open space for any visitor. Therefore, Central Park is . Because Central Park is so big, many people can walk around and enjoy the scenery. This benefit of the park is . Considering those two characteristics, Central park is a QUESTION 2 25 points Save Answer Select the correct word(s) from the drop down menu to finish the following sentences: Chocolate cookies are sold at supermarkets, and sellers only provide cookies to the consumers who purchase them. Therefore, cookies are . If I eat a cookie, it disappears, and the same cookie cannot be consumed by another person. Thus, cookies are C. Considering those two characteristics of cookies, cookies are QUESTION 3 25 points Save Answer Select the correct word(s) from the drop down menu to finish the following sentences: Fish in the ocean can be caught by anyone, and it is difficult to prevent people from fishing, in this sense, fish in the oceans are C. If I catch a fish, that means there is one less fish in the sea for someone else to catch. Therefore, fish are . Considering those two characteristics, fish in the ocean are QUESTION 4 25 points Save Answer Select the correct word(s) from the drop down menu to finish the following sentences: Movies in the movie theater can only be watched by people who purchase tickets. Therefore, movies in movie theatres If I buy a movie ticket and the theatre is not full, other people in the movie theater can watch the movie at the same time. In this sense, the movies in movie theatres are C. Considering those two characteristics, movies in the movie theaters are
