0412-123 Final Solved Questions & Study Guide (Summer 2026)

0412-123 Principles of Finance Final Exam Solved Questions — Summer 2026 (DIU BBA)

Introduction

The Principles of Finance (0412-123) course is a cornerstone of the BBA program at Daffodil International University (DIU), designed to equip students with foundational knowledge in financial decision-making, risk assessment, and valuation techniques. This Summer 2026 final exam tests critical concepts such as expected returns, risk analysis, stock and bond valuation, lease agreements, and retirement planning—all essential for aspiring finance professionals in Bangladesh and beyond.

For DIU BBA students, practicing past exam questions is one of the most effective ways to prepare for finals. Solving these problems not only reinforces theoretical understanding but also builds confidence in applying formulas like expected return, standard deviation, dividend discount models, bond pricing, and time value of money. Whether you're aiming for top grades or a strong grasp of real-world finance, mastering these solved questions will give you a competitive edge.

Exam Overview & Mark Distribution

This Principles of Finance final exam (Summer 2026) covers key learning outcomes from CLO 03 (Financial Analysis and Valuation) and CLO 05 (Risk and Return). The exam includes:

• Question 2 (6 marks): Expected return and risk analysis of two stocks.
• Question 3 (8 marks): Intrinsic value of a stock (dividend growth model) and bond pricing.
• Question 4 (8 marks): Lease rental calculations and retirement planning using time value of money.

Solved Questions

Question 2: Expected Return and Risk Analysis of Stocks

Given Data:

(Note: Pessimistic scenario added for completeness, as probabilities must sum to 1.)

i. Estimate the expected return of both stocks.

Steps:

1. Expected Return Formula:

\( E(R) = \sum (P_i \times R_i) \)

where \( P_i \) = probability of scenario \( i \), \( R_i \) = return in scenario \( i \).

1. Stock A:

\( E(R_A) = (0.40 \times 25) + (0.30 \times 23) + (0.30 \times 20) \)

\( = 10 + 6.9 + 6 = 22.9\% \)

1. Stock B:

\( E(R_B) = (0.30 \times 26) + (0.50 \times 25) + (0.20 \times 22) \)

\( = 7.8 + 12.5 + 4.4 = 24.7\% \)

Answer:

• Stock A: 22.9%
• Stock B: 24.7%

ii. Estimate the risk of both stocks.

Steps:

1. Risk Formula (Standard Deviation):

\( \sigma = \sqrt{\sum P_i \times (R_i - E(R))^2} \)

1. Stock A:

- Variance:

\( 0.40 \times (25 - 22.9)^2 = 0.40 \times 4.41 = 1.764 \)

\( 0.30 \times (23 - 22.9)^2 = 0.30 \times 0.01 = 0.003 \)

\( 0.30 \times (20 - 22.9)^2 = 0.30 \times 8.41 = 2.523 \)

Total Variance = 1.764 + 0.003 + 2.523 = 4.29

- Standard Deviation: \( \sqrt{4.29} \approx 2.07\% \)

1. Stock B:

- Variance:

\( 0.30 \times (26 - 24.7)^2 = 0.30 \times 1.69 = 0.507 \)

\( 0.50 \times (25 - 24.7)^2 = 0.50 \times 0.09 = 0.045 \)

\( 0.20 \times (22 - 24.7)^2 = 0.20 \times 7.29 = 1.458 \)

**Total Variance = 0.507 + 0.045