Master of Business Administration (MBA) Examination

III Semester

Financial Systems and Services

Time : 3 Hours]                                                                                               [Max. Marks : 80

Section A

1.         What is an Asset Management Company? How it operates?

2.         Explain the meaning and significance of "capital market" an "money market". Bring out the similarities and the differences between these markets.

3.         What is an Asset Management Company? How it operates?

4.         Explain briefly the process of portfolio management of a mutual fund.

5.         Why do companies go for leasing of assets? Explain the financial considerations affecting the buy or lease decision of a company.

Section B

NBT Ltd. is thinking of installing a computer. It is to decide whether the computer should be acuired on lease, or be purchased through borrowing at a 12 percent rate of interest payable at the end of the each year. Principal is due for repayment after 10 years. The following data has been collected for the purpose :

Purchase of computer :

Purchase price, Rs. 40,00,000

Annual maintenance, Rs. 50,000 (to be paid in advance every year) Life of the computer, 10 years Depreciation, 15 per cent per annum on written down value basis Salvage value. Rs 4.00,000.

Leasing of computer :

Initial lease payment, Rs. 4,00,000 Lease rent, Rs. 7,00,000 (payable in advance every year for 10 years) Maintenance expenses, to be borne by the lessor.

You are required to advise NBT Ltd. as to whether it should purchase the computer or acquire its services on lease basis, assuming it dos not pay tax.