Module 12 - Ccofia Assessment Centre

1. All of the following regarding motive of a mergers and acquisition exercise are TRUE, EXCEPT?

To prevent an unwanted hostile take-over

To improve an organization’s cashflow and profitability

To improve efficiency

To dispose unwanted stocks

2. Based on the statement below, which of the following statements is true about Melisa and John?

Melisa and John are both considering to invest into Sino Shares with an expected return of 15% per annum and variance of 50. Melisa's risk aversion is 6, John's risk aversion is -2.

(A) Melisa is more risk adverse than John

(B) John is more risk adverse than Melisa

(C) Both have the same risk adverse level

(D) John is risk neutral

3. Azman wants to measure the excess return of his investment portfolio against the portfolio's systematic risk. Which of the following performance evaluation measures should he use use?

Sharpe Index

Treynor Index

Asset allocation effect

Security selection effect

4. Which of the following international financial organisations perform the roles described below?

facilitate the expansion and balance growth of international trade
providing fund and resources to members who experience balance of payment difficulties
provide multilateral systems of payment

International Monetary Fund (IMF)

World Bank

World Trade Organization (WTO)

Asian Infrastructure Investment Bank (AIIB)

5. Garden Bread's common stock has a beta of 1.2. The expected return on the market is 8%, and the risk-free rate is 4%. According to the capital-asset pricing model, the required return on Garden Bread common stocks should be?

7.2%

8.8%

10.2%

7.6%

6.

Ordinary shares are expected to give higher returns as compared to bonds and debentures

There is a higher interest rates on bonds and debenture

There is uncertainty of future cash for ordinary shares

There is a higher demand for ordinary shares

There is a lower demand of bonds and debenture

7. Ria Berhad has an issued and paid-up share capital of RM500 million and the share price is currently trading at RM95 per share. The management of the company is of the view that the share price is too high and might be unattractive to potential shareholders of the Company. Which of the following corporate exercises should Ria Berhad undertake to align the price of the Company's shares to the rest of the industry?

Bonus issues

Capital reduction

Rights issues

Share repurchase

8. All of the following contract terms are part of a debt contract, EXCEPT:

The timing and schedule of the interest and repayment period of the borrowing

Financial requirements and restrictions imposed on the debt instrument subscriber

The size of the issue of the borrowings

The rights of the holder of the debt instrument

9. If the Telco Bhd is seeking to raise revenue by increasing the price of prepaid cards, it will be most successful where price elasticity of demand is :

Elastic

Inelastic

Highly elastic

Correlate to the demand of the prepaid cards

10. XYZ Berhad has a direct business transaction with a foreign client and the company is arranging a trade loan agreement with a bank for the transaction. The transaction is expected to have a continuous shipment over the next 24 months. Which of the following loan facilities will be most suitable to facilitate the business transaction?

Bill of collection

Red Clause Letter of Credit

Revolving Letter of Credit

Back-to-back documentary Letter of Credit

11. Which of the followings is a standardised measure of systematic risk?

Standard deviation

Coefficient of variance

Beta

Variance

12. ABC Berhad has planning to reduce the Company's debt with equity by way of rights issue. The proceeds from the rights issues will be used to repay the Company's debt. Which corporate finance strategy did the Company adopt?

Capital reduction

Leverage buyout

Recapitalization

Liquidation

13. All of the followings are a form of bank security for a loan, EXCEPT?

Assignment

Call warrants

Negative pledge

Debenture

14. All of the followings are TRUE regarding the factors that a portfolio manager would need to consider in evaluating the performance of a portfolio, EXCEPT:

Comparison of performance with the best fund in the market

Consider limitations faced in managing the portfolio

Determine the time frame of the performance evaluation

Identify an appropriate benchmark

15. All of the following statements are major assumptions of Arbitrage Pricing Theory (APT), EXCEPT:

Investors prefer more wealth to less wealth

Investors can borrow or lend at a risk-free rate

Capital markets are perfectly competitive

The return on asset is expressed in a linear equation

16. Which of the following portfolios has the highest Treynor index?

Portfolio	Return	Standard Deviation	Beta	Excess Returns
ManU	20%	44%	1.8	2.0
ManC	16%	37%	0.9	2.5
Arsene	17%	41%	1.5	3.0
Leicester	22%	33%	1.2	5.5

ManU

ManC

Arsene

Leicester

17. An entrepreneur is seeking investors to invest in a project in which the entrepreneur will manage the operations. Both parties agreed in a 70:30 profit split, while the losses will be borne by the investor. Which shariah concept does this imply?

(A) Ijarah

(B) Mudharabah

(C) Murabahah

(D) Musharakah

18.

Melisa and John are both considering to invest into Sino Shares with an expected return of 15% per annum and variance of 50. Melisa's risk aversion is 6, John's risk aversion is -2.

Which of the following is true in relation to the UTILITY LEVEL of Melisa and John?

John’s utility level is lower than Melisa’s

Melisa’s utility level is lower than John’s

Both John and Melisa utility level has the same level

John’s utility level depends on Melisa’s

19. A social club wants to raise revenue to cover club activities to cover its running cost. Its revenue comes from membership fees and partly from selling charity movie tickets. There is a huge demand for movie attendance and exceeds the hall capacity. The demand for membership is price inelastic and the demand for the movie tickets is price elastic. To reduce the crowding without changing its total income, what should the club do?

Increase the movie ticket price but decrease the membership fee

Decrease the movie ticket price but increase the membership fee

Increase the movie ticket price and increase the membership fee

Decrease the movie ticket price and decrease the membership fee

20. Which of the following statements describing beta is CORRECT?

The higher the beta , the more volatile the asset in comparison to the market
The beta of a market portfolio is 1
The higher the beta, the higher the expected return from asset
Fundamental betas are designed to capture the effects of technical changes of the security

(i) and (ii) only

(i), (ii) and (iii) only

(i), (ii) and (iv) only

(i), (iii) and (iv) only

21. DNCE Berhad. is going through a series of corporate exercises in which they have transferred assets of a few business subsidiaries into a newco. There will be a new management in the newco but still reports back to the same shareholders. What type of divesture is DNCE Berhad is currently going for?

Winding-up

Spin-off

Equity carve-out

Recapitalisation

22. All of the followings are components of Capital Account, EXCEPT :

External borrowings

Corporate investment

Short-term capital

Investment income

23. Laris Herbs Berhad has a capital structure comprises of RM25 million debt, RM5 million preference shares and RM20 million in ordinary shares. The cost of debt, preference shares and ordinary shares are 8%, 10%, and 15%, respectively. Assuming that the tax rate is 25%, what is the the weighted cost of capital for Laris Herbs Berhad?

8.25%

11.7%

10.0%

11.0%

24. Highland Bhd's shares have the following features :

Economic Condition	Probability (%)	Rate of Return (%)
Strong	30	20
Average	45	12
Poor	40	-3

Based on potential rate of return and probability above, which of the following shares is/are better to invest as compared to Highland Bhd's shares?

Shares	Expected Rate of Return (%)
P	8
Q	9
R	10
S	11

P and Q only

R and S only

R only

S only

25. Which of the following parties has the right to sell an underlying asset at a specific price for a specific time period?

Put option seller

Put option buyer

Call option seller

Call option buyer

26. Robert holds an option which allows him to buy an underlying asset. Currently the option's strike price is above the underlying asset price. What is the type of option does he has and the moneyness of Robert's option at this point of time?

Put option – in the money

Put option - out of money

Call option – in the money

Call option – out of money

27. The cash inflows and (outflows) associated with Project A and Project B are as follows:

Time	0	1	2	3	4
Project A	(120,000)	40,000	50,000	60,000	80,000
Project B	(120,000)	30,000	60,000	70,000	80,000

Calculate the payback period for project A.

3 years

2 years 5 months

2 years 6 month

2 years 8 months

28. Calculate the theoretical share price of the Company after a 1:2 bonus exercise.

Authorised share capital : RM1,000,000 @ RM1.00 par valueIssued paid up share capital : RM200,000Share price is RM30 per share

RM10

RM20

RM60

RM90

29. On 17 March 20XX, the FBM KLCI is at 1,670. The risk-free interest is 7% per annum. The weighted average dividend yield is 3.5%. What would be the fair value of the FBM KLCI as at April 20XX?

1,675

1,684

1,692

1,728

30. For evaluation of performance of portfolio managers, which of the following components are comprised in performance attribution analysis?

Securities selection effect.
Market relative study and evaluation.
Strategy policy decision.
Asset allocation assessment.

(i), (ii), and (iii) only

(ii), (iii), and (iv) only

(i), (iii), and (iv) only

(i), (ii), and (iv) only