NATIONAL OPEN UNIVERSITY OF NIGERIA

UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF MANAGEMENT SCIENCES
JUNE/JULY 2018 EXAMINATION

COURSE CODE:      BFN715                                                           

CREDIT UNIT:   2   

COURSE TITLE:     PRINCIPLES OF FINANCE

TIME ALLOWED:   2 HOURS     

Instructions:

1. Attempt question number one (1) and any other two (2).

1. Differentiate the following paired terms:

i. Annuity and Loan Amortization

ii. Simple interest and Compound Interest

iii. Equity Securities and Debt Securities

iv. Residual dividend policy and Stable dividend policy

v. Lease and Hire Purchase   (30 marks)

2a. James limited has a liability of  N90,531.97, which must be repaid in four (4) years’ time.The liability pays 15% interest compounded annually. Calculate the present value of the total liability.     (8 marks)

2b. Discuss four (4) factors that influence dividend policy decisions of firms.   (12 marks)

3a. You are requested to determine how much fund will be saved at the end of yearfive (5), if N1000 is deposited annually in a savings account paying 7% based on annual compound interest.        (8 marks)

3b. Discuss three (3) types of preference shares.   (12 marks)

4a. Discuss four major managerial functions of a financial manager in a limited liability compan        (16 marks)

4b. Calculate the present value as at January 10, 2019 of a perpetuity paying N10,000 at the end of each month starting from January 2019.The monthly discount rate is 0.8%  (4 marks)

5a.Mr. John put  N100,000 in a fixed deposit account with a financial institution that offers 24% interest per annum, payable twice in a quarter. Calculate the compound value of the investment if it is made for 3 years.   (12 marks)

5b. Discuss the two major Sources of Finance available to a business entity.(8 marks)