Ans B: At a conceptual level, Yield on Premium Bond Interest expense reported in Income statement Carrying Value * Yield. So the interest expense on a discount bond will be higher than interest expense on a premium bond. We knowInterest coverage ratio = EBIT/ Interest. Given the financials are same only denominators will differ. So discount bond of Tamo which has higher interest expense will have lesser interest coverage ratio!.Specific to our example TAMO's bond will attract an YTM at issue of 10.5% and MM's bond an YTM at issue of 9.5%. For first year Tamo's bonds will have an interest expense of 98*10.5%=10.32. MM's bond will have interest expense of 98*9.5% = 9.7. So ICR of Tamo MM's ICR for the entire life (all else remaining equal) . This explanation holds for straight line amortization of bond/premium also
CFA level 1 question for 19-Mar-13Zeal Ltd bought a machinery for Rs.200 crs. The tax base of the machine at the end of Year 3 is Rs.50 crs and carrying value at the end of year 3 is Rs.80 crs. The tax rate is 35% till the end of year 3.At this point if the tax rate decreases to 25% what would be the change in deferred taxa)Deferred tax liability will increase by Rs. 3 crsb)Deferred tax liability will decrease by Rs.3 crsc)Deferred tax asset will increase by rs.3 crs
Ans B: When carrying Value >tax base it will result in deferred tax liability. Deferred tax liability@35% tax rate would be (80-50)*35%, when tax becomes 25% DL would be (80-35)*25% Decrease in DL = (80-50)*(35%-25%) = Rs.3 crs
Kashyap Ltd and Peter Ltd reported exactly similar financial profile and business during last financial year, except for the fact that Kashyap Ltd used LIFO inventory and Peter Ltd used FIFO inventory in the current inflationary environment. All else being equal the working capital turnover ratio of
CFA level 1 question for 20-Mar-13Following are the selected ratios from ABC ltd €™s latest financial statement. What is the ABC €™s Return on Equity?Sales (Rs mn): 125,000Pre Tax Profit Margin: 12.2%Tax rate: 30%Asset Turnover ratio: 1.93XDebt Equity ratio: 60%a)9.9%b)44.0%c)26.4%
Chris and Will were discussing during an analyst conference. They made the following comments
Chris: The capital market Line in CAPM captures both systemic and unsystematic risk of security and hence it provides the right measure of expected return of a security
Will: The slope of the capital market line will be given by Sharpe €™s ratio
With respect to the above discussion who is correct?
A)Both Chris and Will are correct B)Only Chris is correct C)Only Will is correct
@FRM_Dood The Professional one has some extra features like PB and DPB which you'll come across in Corp Finance. I'd say go for the Professional, its just a few more hundreds and its worth it.
CFA Level 1- Free Sectional Mock Test €“ Financial Reporting and Analysis
Dear All,
A free sectional mock test is available on Financial Reporting and Analysis for CFA level 1 candidates in the below link. Request you to attempt this for self-evaluating and understanding where do you stand in the run up for the exam.
CFA level 1 question for 21-March-2013Kashyap Ltd and Peter Ltd reported exactly similar financial profile and business during last financial year, except for the fact that Kashyap Ltd used LIFO inventory and Peter Ltd used FIFO inventory in the current inflationary environment. All else being equal the working capital turnover ratio ofa)Kashyap's > Peter'sb)Peter's > Kashyap'sc)Peter's = Kashyap's
Ans A:
Working capital turnover ratio = Sales / Working capital Working capital = Current assets – current liabilities When LIFO inventory is used in an inflationary scenario the cheapest items will remain in the inventory compared to FIFO. Hence Current assets will be lower which will lead to lower working capital under LIFO. With sales remaining same under both LIFO and FIFO and lower Working capital under LIFO would lead to higher Working capital turnover ratio, when LIFO is used in an inflationary environment
Shruti has the option of paying her college fee of Rs 200,000 in a lump sum now, or she can pay it in equal ADVANCE installments of Rs 53,000 over the next 4 years (i.e one installment Now + 3 years of advance payment). What is the discount rate above which she should choose to pay in installments?
I need help as i m doing PM & in a silly thing i have got stuck is that on Schweser's notes pg#194 there is a chart by which we are to calculate sample standard deviation for calculating INFORMATION RATIO so when i m trying to do that by calculator i m unable to get right standard deviation i.e 0.0063 so can anyone plz help me?
CFA level 1 question for 22-Mar-2013Chris and Will were discussing during an analyst conference. They made the following commentsChris: The capital market Line in CAPM captures both systemic and unsystematic risk of security and hence it provides the right measure of expected return of a securityWill: The slope of the capital market line will be given by Sharpe €™s ratioWith respect to the above discussion who is correct?A)Both Chris and Will are correctB)Only Chris is correctC)Only Will is correct
Ans C: The capital market line captures both systematic and unsystematic risk. However expected return should compensate only for risk that cannot be diversified.
The slope of CML will be given by Sharpe €™s ratio which is correct