FM Progress Test Answers S20-J21

Jul 17, 2026

Uploaded by Theodore

FM Progress Test – Answers provides solution guidance for the ACCA Financial Management (FM) Progress Test. The document sets out worked answers across two sections, including scrap value and relevant cost calculations, probability-based expected profit, IRR and interest-rate computations, yield curve theory interpretation, risk classification, option exercising decisions using call/put outcomes, and forward rate derivation via interest rate parity. It also includes valuation methods such as net assets, dividend yield, P/E, and dividend discount model growth-rate and cost-of-debt computations, finishing with WACC and capital structure considerations.

LanguageEnglish

CategoryExam

FormatPDF

Pages14

Reading Time35 min

AccessFree to download

ACCA FM Financial Management Progress Test – Answers To gain maximum benefit, do not refer to these answers until you have completed the progress test questions and submitted them for marking. © Kaplan Financial Limited, 2020 The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties. Please consult your appropriate professional adviser as necessary. Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, and consequential or otherwise arising in relation to the use of such materials. All rights reserved. No part of this examination may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without prior permission from Kaplan Publishing. SECTION A 1 $1,300 Fall in scrap value $500 Cost of adjustments $800 Relevant cost $1,300 2 20% Try 20% Year Cash 20% PV $ $ 0 (75,000) (75,000) 1 – 5 25,000 2.991 74,775 –––––– (225) –––––– IRR = 15 + (8,880,800225) × 5 IRR = 15 + 89,,800025 × 5 IRR = 19.88% therefore 20% to the nearest 1% 3 B The total dividend per share is 9.6c + 10.8c = 20.4c (20 .4/356) × 100 = 5.73% 4 A The expectations theory holds that the shape of the yield curve reflects investor expectations about the future behaviour of inflation and market interest rates. Thus if investors believe inflation will be slowing down in the future, hey will require lower longterm rates today and, therefore, the yield curve will be downward-sloping. 5 C 1 = Unsystematic risk, 2 = Total risk, 3 = Systematic risk 6 D Outcome (x) Probability (p) px ($5,000) 0.20 ($1,000) $1,000 0.30 $300 $7,000 0.40 $2,800 $12,000 0.10 $1,200 Average monthly profit = $3,300 7 A Interest cover = operating profit/interest = 100,000/25,000 = 4 times 8 D Opening cash $700 + October net cash flow $15,050 + November net cash flow $7,680 + December net cash flow $10,800 = $34,230 deposit. 9 A (1) The investor can buy GBP 500,000 for USD 950,000 compared to USD 975,000 on the spot market. (2) The investor can sell the GBP 400,000 for SGD 1,160,000 compared to SGD 1,180,000 on the spot market. The call option should be exercised but the put option should not be exercised. 10 1.4379 Applying interest rate parity: Invest GBP 1,000 at 5.75% for three months (0 .0575/4) = GBP 1,014 .375 Convert GBP1,000 to EUR at 1.4415 = EUR 1,441 .5 Invest that at 4.75% for three months (0 .0475/4) = EUR 1,458 .62 Implied forward rate is therefore 1,458 .62/1,014 .375 = 1.4379 11 A exercised in o

Jul 17, 2026

Uploaded by Theodore