Computer Based Financial Engineering – BIM (TU) Question Paper 2014 | 8th SEM

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Computer Based Financial EngineeringTribhuvan University | Faculty of Management
BIM / Eighth Semester / Year: 2014 (2071)
ITC 303: Computer Based Financial Engineering

Candidates are required to answer the questions in their own words as far as practicable.
Full Marks: 40 | Time: 2 Hrs

Group “A” – Short Answer Question: [10 X 1 = 10]

1. What is Compound Interest?
2. Define call and put option.
3. What is forward contract?
4. When do we say that the option is “in the money”?
5. What is contribution margin?
6. What is secular trend?
7. Why swap is called Zero sum game?
8. List out the different method to find the trend in time series.
9. Define European option.
10. Define Symmetric Hedging.

Group “B” – Long Answer Question (Any THREE): [3 x 10 = 30]

11. a. Explain the difference between Financial Analysis and Financial Engineering. [4]
b. CVP analysis is important tool for managerial decision making. Explain. Delight Climate Pvt. Ltd. Has sales of Rs. 100,000 in 2012 which was less by Rs. 50,000 of 2013’s sales. Profit of 2013 is higher by Rs. 20,000 than in 2012. Compute break-even point of Delight Climate Pvt. Ltd. [2 + 4]

12. a. You are given the LIBOR interest rates for dollars and euro’s as below:

Terms in daysDollar Libor (L0) %Euro LIBOR (L0) %
1806.004.75
3606.354.95
5406.805.15
7207.105.25

The Global Technology agrees to enter into the Currency Swap with Microsoft Company where the Global Technology pays fixed rate of interest in Euro and agrees to receive floating rate in dollar. At the date of contract, the one dollar is equivalent to 0.85 Euros. The payment of interest is semiannual in the currency swap. The Global Technology enters into the currency swap of amount $5,000,000. Calculate the gain of loss of Global Technology on firs payment exchange. [6]
b. Explain the different types of financial software package. [4]

13. The common stock of Shree Ram Sugar Mill is currently selling for Rs. 55. The call option matures in 3 months, the current risk free rate is 6% the firm pays no cash dividends, and the exercise price of the call option is Rs 50. After careful study, you conclude that an instantaneous variance of the rate of return is 0.20. Using the Black-Sholes Option pricing model, find the expected value of the option. [7]

14. a. Calculate the 4-year moving average for the following data and plot the graph of it. [6]

Year1991199219931994199519961997199819992000
Profit (Rs. In Lakhs)50595565807580889095

b. Mr. Bharat Karki deposits Rs. 30,000 in NIBL which pays 5% interest quarterly for four years. If he makes no withdrawal of except after two years, he withdraws Rs 10,000. What will be the balance after four years? [4]

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