# Finance

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Solution Library **

Our Finance Solution Library Page contains so numerous questions, essay, problems and case studies that help in developing an in-depth knowledge on the subject.

Put it simply, finance deals with application of financial, economic and accounting principles which help in maximizing wealth and overall value of an organization. In fact, maximizing the wealth is regarded as one of the primary objectives of an organization. The value of a firm can be measured by the market price of shares of the company. Many a times, the higher the share value, the better the company’s performance, financially.

**Capital Structure:** In order that a company performs better financially, it must have a good capital structure. Capital structure is the way in which a corporation buys its assets by combining equity share capital and debt. While equity share capital belongs to shareholders, debt is provided by a third party. Our solution library has various questions, problems and case studies on capital structure, which make it easier for you to understand the concept thoroughly, both theoretically and practically.

**Working Capital Management:** Working capital management is a short term financial activity which is used for running the day to day activities of the firm. It is the difference between current assets and current liabilities. There are several problems and scenario analysis questions on working capital in our solution library dealing with working capital management.

**Time value of money:** Time value of money plays a crucial role in finance. Time value of money gives rise to various concepts such as present value (PV), future value (FV), net present value (NPV), internal rate of return (IRR), profitability index (PI), etc. Each of these concepts help in calculating the earning capacity or potential for money invested. In other words, one make a benchmark for earning capacity or rate of return for an investment by using the time value of money. Several problems, short answer questions, essays, cases and scenarios have been covered under time value of money in our Finance Solution Library page.

**Financial Statement Analysis:** Financial statements of a firm include income statement, balance sheet and cash flow statement. Each of these statements provide accounting and financial information which is used to arrive at the financial position of the firm with the help of certain tools and benchmarking techniques. Ratio analysis is one such practice used to know the financial position of a firm. Our solution library has several essays, problems, scenarios and cases on financial statement analysis which offer a comprehensive understanding of the topic.

**Derivatives:** Derivatives are financial instruments which are calculated by an underlying asset. These can be stock and commodities, government bonds, etc. The questions and problems covering derivatives in our solution library range from Options and Futures, Forwards, Swaps, Currency options and Futures, Hedging Strategies, etc.

**Mergers and Acquisitions:** Mergers and acquisitions play a major role not just in corporate strategy but also financially. Merger is merging two or more companies into one and acquisition is one company acquiring one or more companies and making them its own. Various questions and problems under merger and acquisitions can be found in our finance solution library.

**Problems and case studies in finance:** Our Finance Solution Library contains several problems and case studies which deal with topics mentioned above and more.

#### Profit or Loss to a Short Forward Position MCQ

Question The current price of a stock is $42. The stock does not pay dividends. A 3-month forward contract on this stock is priced at $44. What is closest to the profit or loss to a SHORT forward position if the spot price of the stock rises to $45 on the expiration date? (a) &nbs ... Read More

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#### Derivative Positions in Hedging a Stock MCQ

Question You have a SHORT position in XYZ stock. You are worried about the possibility of this position losing money. Which of the following derivative positions would be least helpful in hedging your short position in XYZ stock? (a) Long ... Read More

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#### Payoff from a Long Position in the Call Option MCQ

Question XYZ is a stock currently priced at $106 and does not pay a dividend. Consider a one year call option with strike price $105. What is closest to the payoff from a long position in the call option if the stock price rises to $109 in one year? (a) &nb ... Read More

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#### Stock Value Closest to the Price of a One Year Call MCQ

Question XYZ is a stock currently priced at $100 that does not pay a dividend. Assume further that the annual effective interest rate is 4% (i.e., $100 loaned today will return $104 one year from now), and that a 1-year put option with strike price $106 is priced at $8. What is cl ... Read More

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#### Price of a One Year Forward Contract on Stock MCQ

Question XYZ stock is priced at $100. The continuously compounded dividend yield on the stock is 3%. The continuously compounded interest rate is 5%. Which is closest to the price of a 12-month forward contract on XYZ stock? (a) $99 (b) & ... Read More

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#### Price of a One year Forward Contract on Stock MCQ

Question XYZ is a stock currently priced at $100. It is anticipated that XYZ will pay a special dividend of $5.25 in 1 year. Assume further that the annual effective interest rate is 5% (i.e., $100 loaned today will return $105 one year from now). What is closest to the price of a ... Read More

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#### Graph PAYOFF function of Stock and to find Common Derivative

Question XYZ stock is currently trading at $100. The one-year effective interest rate is 5% ($1 lent today yields $1.05 one year from now). A one year put with strike price $105 is priced at $5. Suppose you buy one put for $5, buy one share for $100, and borrow $100. Graph the PAYOFF ... Read More

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#### Calculation of Forward Price of a Stock that Pays no Dividend

Question Consider a stock that pays no dividend trading at $100. Suppose one-year call options with strike prices of $95, $100, $105, and $110 can be bought for a premiums of $16.41, $12, $9, and $7.24 respectively. Suppose the annual effective interest rate is 5% (i.e., a $100 bond pay ... Read More

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#### Objectives When Formulating a Risk Management Strategy

Question Suppose you are advising a gold mining firm on risk management strategy. It has a mine capable of producing ten ounces of gold per year. This year, the firm plans to produce 10 ounces. The firm’s cost of production in $1200 per ounce, which it is committed to paying ... Read More

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#### Detailed and Analytical Valuation ofÂ a Stock

Question Provide a detailed and analytical valuation of a selected stock. Also provide a statement of its portfolio’s relative risk and vulnerability to economic trends as well as the measures of profitability of the individual assets in its portfolio. Summary: This question belongs to finan ... Read More

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#### Reasons for Switching from One Convenience Product to Another

Question Make a list of all the convenience products you buy in a week (any week is okay). Does the list change from week to week based on need or your budget? What would it take to make you switch from one product to another? Summary This question belongs to finance and discusses about budget on ... Read More

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#### Business Strategy of Aspen Technology Inc

Question Aspen Technology, Inc: Currency Hedging Review This case is intended to analyze how a small, young firm's business strategy creates currency exposure and a need to manage this exposure. It is designed to explore the conflicting rationales for risk management and the measurement of e ... Read More

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