NATIONAL OPEN UNIVERSITY OF NIGERIA
PLOT 91, CADASTRAL ZONE, NNAMDI AZIKIWE EXPRESSWAY, JABI, ABUJA
FACULTY OF MANAGEMENT SCIENCES
JULY 2018 EXAMINATION
COURSE CODE: MBF839 CREDIT UNIT: 3
COURSE TITLE: QUANTITATIVE TECHNIQUES FOR BANKING AND FINANCE
TIME ALLOWED: 3 Hours
INSTRUCTIONS: 1. Attempt question Number one (1) and any other three (3).
2. Question number 1 is compulsory and carries 25 marks, while the other questions carry 15 marks each
3. Present all your points in coherent and orderly manner
(1) Joy Furniture Company produces Tables and Chairs in a factory. The production process is the same for the two products in that each product requires a certain number of man-machine assembly hours: 2 hours for one chair and 3 hours for each table. Each chair and table also requires 1 hour finishing man-machine time, respectively. During a production cycle, there are 240 assembly man-machine hours and 100 finishing man-machine hours. One unit of chair contributes N250 to profit while one unit of table contributes N300 to profit. Advice the management of Joy Furniture Company on the optimal production of chairs and tables to maximize the company’s profit, using the simplex method of linear programming. Show the complete solution of this production decision.
25 Marks
(2) Given the following primal problem.
Minimize: Z = 20X1 + 40X2
Subject to: 2X1 + 20X2 ≥ 40
20X1 + 2X2 ≥ 20
5X1 + 15X2 ≥ 30
X1, X2 ≥ 0
(a) Use graphical solution method to obtain the solution of the above problem. 9 Marks
(b) What is the major limitation of the graphical method of solving linear programming problem? 2 Marks
(c) Formulate the dual of the above problem. 4 Marks
(3) Because of an innovative breakthrough, current dividend per share of N2.00 of Oluwa Foundries Ltd (OFL) is expected to grow at a very high rate of 32% per annum for the next three years and then normalize at a steady growth rate of 6% per annum subsequently. What would be the value of the company’s share if the shares’ market required rate of return is 20%. 15 Marks
(4) (a) Demand by your company of a product is 5,000 units per year. Ordering costs are N100 per order and the basic unit cost price of the product is N5. Inventory holding cost is 20% of the cost price per annum. Your company is offered the following quantity price discount:
1,200 – 1399 less 10%
(a) What is the most economical quantity to order? 8 Marks
(b) Explain the concept “inventory” with examples different from stock of goods.
3 Marks
(c.) Why do economic units hold inventory? 4 Marks
(5) Consider a project with the following activities.
Activity
Predecessor Activity
Time (Weeks)
A
–
3
B
–
3
C
A
2
D
A
6
E
B
5
F
C
4
(i.) Draw the PERT network of this project. 3 Marks
(ii.) Identify the different paths of activities in the project. 3 Marks
(iii.) Identify the critical path. 3 Marks
(iv.) What is the project completion time? 3 Marks
(v.) Will the critical path change if activity C takes 4 weeks instead of 2 weeks? If so, will the critical path change? 3 Marks
(6) Arewa Development Company has a bond with par value of N1,000 and outstanding life of 10 years remaining to maturity. The bond pays annual coupon interest at the rate of 18% per annum. The market rate of return (yield) is 15% for this type (risk class) of bond.
(a) What should be the bond’s market price? 6 Marks
(b) If the bond is currently selling at N1076, what is the yield to maturity of the bond?
6 Marks
(c) If the bond is currently selling at N1076 and your required rate of return for this type (risk class) of bond is 15%, will you buy this bond? 3 Marks
You can get the exam summary answers for this course from 08039407882
Check anoda sample below
