UJIAN AKHIR SEMESTER

INVESTASI & PASAR MODAL

90 Menit

Instructions:
Anda akan diminta untuk membuat kelompok yang terdiri dari 3 orang anggota
Dalam soal ujian, akan terdapat 7 topik dimana di dalamnya terdapat 1 sampai 2 kasus untuk
setiap topik. Topik dan kasus tersebut adalah:
1. Fundamental Analysis
2. Technical Analysis
3. Efficient Market Hypothesis
• Implications of the Efficient Market Hypothesis for Investors
• Analysis the behavior of the Indonesia stock market
4. Financial Risk Management & Derivative
• Arbitrage
• Future & Option
5. International Financial Management
• Direct Foreign Investment
• International Financial Market
6. Recent Topics of Financial Management
• FinTech
• Crypto
7. Islamic Finance
• Islamic Financial Institutions
• Islamic Financial Market
Setiap kelompok akan memperoleh kasus yang wajib di kerjakan juga 2 kasus pilihan dimana
kasus pilihan tidak boleh berasal dari topik yang sama sehingga total kasus yang akan
dikerjakan oleh tiap kelompok antara 3-4 kasus.
Pembagian kasus wajib untuk kelompok adalah sebagai berikut:
• Kelompok 1 dan 6 : Fundamental analysis
• Kel 2 dan 7 : technical analysis
• Kel 3 dan 8 : International Financial Management (Direct Foreign Investment)
• Kel 4 dan 9 : International Financial Management (International Financial Market)
• Kel 5 dan 10 : Recent Topics (Crypto) & Islamic Financi (Islamic Financial Institutions)

Pada lembar jawaban jangan lupa sertakan identitas kelompok (nama dan NPM)
Waktu pengerjaan 90 Menit
Dikumpulkan dalam bentuk pdf (ketik/scan jika ada data tambahan yang dinilai perlu) ke
Google Classroom atau Email dosen masing-masing.
Fundamental Analysis

The market for 100-year corporate bonds may soon dry up. The Treasury
Department has argued that 100-year debt should be treated like equity and
therefore lose its tax benefit. The favorable tax treatment of the century bonds is
expected to remain for bonds issued prior to any change in the law. It is rumored
that IBM’s management is trying to beat the possible tax law change by issuing
$850 million in 100-year bonds.

Working as a pension fund manager with a significant holding of IBM common

The phone rings. It is Spencer Scott, the CFO of a major client firm for whom
Evelyn manages a pension plan. Spencer usually calls once a month but this was
the second call this week. "Evelyn, I just saw a newspaper report that IBM might
issue some century bonds. What may be good for IBM may not be good for us as
stockholders." Spencer knows the characteristics of the portfolio Evelyn manages.
"I am worried about the effect of an increase in outstanding debt on IBM's stock
price. It does not look good for the plan's returns. What are you going to do?"

"Don't worry, Mr. Scott," Evelyn assures him. "I am on top of the situation and
have a plan." Evelyn tells him that she will call back later in the morning. What
should Evelyn do?

The variable  captures the extent to which an asset’s return moves relative to the
market, a measure of a stock’s market risk. If  = 1.0, a stock has average risk, if  >
1.0, a stock is riskier than average, and if  < 1.0, a stock is less risky than average.
One of the determinants of IBM’s  is financial leverage. High debt relative to
equity financing makes net income sensitive to changes in revenues. If all risk is
borne by IBM shareholders (the  of debt = 0) and debt has a tax benefit, then the
relationship between the  in a leveraged IBM,  , and the same IBM operating
L

without leverage,  , is
U

 =  [1 + (1 - t)(D/E)].
L U
The variable t is IBM’s marginal tax rate and D/E is IBM’s debt-to-equity ratio. The
 is determined by the cyclical nature of IBM’s business and its operating
U

leverage, not IBM’s financial leverage.

With IBM's current  , tax rate, and debt-to-equity ratio, Evelyn can remove the
effects of financial leverage on IBM's market risk. The effects of a hypothetical
debt structure, including the additional debt of $850 million in century bonds, on
IBM's  can then be estimated. Evelyn plans to estimate IBM's required rate of
return for common stockholders before and after the issuance of new debt, using
the CAPM. When she calls Spencer Scott back, Evelyn can be precise about the
effect on IBM stockholders.

Given the short deadline to return Spencer's call, Evelyn needs IBM financial data
quickly. Her personal investment advisor, "Mac" Johnson, suggests several
Internet sites. Risk-free rates can found at the Federal Reserve Statistical Release H.15,
among other places. MSN MoneyCentral Investor, MarketGuide, Quicken, and
Yahoo! Finance Company and Fund Index contain information on stock betas and
fundamental financial information about IBM. Data on IBM’s financial structure
and the information needed to calculate an average tax rate will go a long way
toward answering Evelyn's questions.

How much will the increase in financial leverage increase IBM’s  ? More
important, how will the required rate of return be affected? Historically, IBM has
not carried much debt. If the additional $850 million in century bonds is "small"
relative to IBM's total assets, the impact might also be insignificant. If the impact
is significant, however, Evelyn needs to manage the risk. "But how?" Evelyn thinks
out loud. Spencer Scott will expect a plan of action.

"Are you talking to me?" asks Asok, her intern, working in the same room. Evelyn
is elsewhere, deep in thought.

1. Why does high debt relative to equity financing make IBM's net income
sensitive to changes in revenues? Explain.

2. What are other determinants of IBM's systematic risk besides financial

"Why didn’t I see this coming?" muttered Dan Kurtiss out loud, as he read section C of the Wall
Street Journal. "But could I really have done something, anything, differently? The number of
attractive stocks I considered undervalued by the market was just so small I had to build cash.
The low return on cash assets then caused my overall return to lag the S&P 500 by 15 percentage
points. My new Camry is farther away than it might have been."

"Who are you talking to?" asked a voice from the doorway. It was Jenny Mullern, the new
production assistant. "Here’s the copy to proof for the brochure. Design says they’re done with
it. Oh, I see. You’re talking to yourself about your investments and that new car you want. Make
sure you get the moon roof. My uncle -- a broker -- says that a person hardly ever listens when
they talk to themselves about investments."

"You have an uncle in the brokerage business? Does he ever give you advice on investments?
How good is the advice?"

"Sure, he helps me all the time with the timing of stock purchases and sales," replies Jenny as she
sits down in the guest chair. "Although I don’t totally understand it, he uses some ratio of put
options to call options to signal the potential for a fall in the market. Before I buy stocks, I call
him to get his opinion on the direction of the overall market. Here is his telephone number; call
his firm and talk with him about it. Tell him you are a friend of mine. Ice blue is an excellent
color for the Camry."

An owner of a call option has the right but not the obligation to purchase a fixed quantity of
some security from the option seller at a fixed exercise price before a certain date. An owner of a
put option has the right but not the obligation to sell a fixed quantity of some security to the
option seller at a fixed exercise price before a certain date. Buying a call (put), where the
underlying instrument is a stock share, is profitable when the stock price rises (falls). The
volume of equity-only (excluding index and futures options by definition) put options traded on a
given day divided by the volume of call options is a contrary measure of market sentiment,
especially if greater than 0.75. A high (low) put/call ratio indicates few (many) traders are
available to do the selling necessary to drive prices down. A high (low) ratio therefore indicates
limited downside (upside) potential.

Duane Mullern is more than willing to help Dan. "One reason I like to use the equity-only
put/call ratio is because it is a quantifiable measure of the stock market that works regardless of
the current market P/E ratio or dividend yield. Rather than be swayed by emotion, the put/call
ratio gives me cold, hard data to look at when making decisions. One year after my last five
signal dates (December 3, 1987, October 10, 1990, January 8, 1991, October 10, 1994, and July
15, 1996), the average annual gain in the S&P 500 has been 30.6%. Granted, the signals don’t
come very often but when they do, get ready to go," Duane tells Dan over the telephone. "Now,
Dan, I can search my database back to December 1, 1997, for put/call ratio indicators and maybe
we can talk about the current tone of the market. I’ll be in touch. Thanks for calling and say hello
to Jenny for me."
After living in the Chicago area for five years, Dan knows that the Chicago Board Options
Exchange is the largest options exchange in the world and likely to maintain a web site with
important market level data. Perhaps the web site will carry the historical information that Duane
Mullern is supposedly seeking. Dan is happy with his discount broker and sees little need for the
change to a full-service broker like Duane. There are other Internet sites that offer charting and
related capabilities, such as BigCharts, ClearStation, and CBS MarketWatch, to help in the
investment timing decision.

The morning and early afternoon vanishes in a blur of committee meetings and visitors to Dan’s
office. Dan runs into Jenny at the vending machines on third floor. "My uncle called this
morning, Dan, and asked to visit me here at work. He said he enjoyed talking with you and wants
to take us both to lunch next Thursday. Karen says your calendar is free. How about it? I’ll
drive."

1. What behavioral assumptions underlie a "contrary measure of market sentiment?" Do

2. Where does the critical number 0.75 necessary for a strong equity-only put/call ratio come
from, as best as you can determine?
Efficient Market Hypothesis

1. Implications of the Efficient Market Hypothesis for Investors

If you believe the efficient market hypothesis to be true, then your best action as an investor is to
invest solely in index funds that match the market. Under the efficient market hypothesis, it is
impossible to outperform the market, so you will achieve maximum risk-adjusted returns by
simply owning the entire market. You can use index funds or index ETFs to achieve this goal.

If you believe the efficient market hypothesis is not true, then your best action is less clear. It
can still be rational to invest in index funds. Even if the market is not efficient, you could still
capture average market returns without much effort. This can be a very positive outcome.
However, if you wanted to outperform the market, then you could follow a number of value-
based strategies to increase your odds of success. I will cover these strategies in depth. I believe
it is possible for an individual to either beat the market or match the market with less risk than
the market as a whole.

Do you think the market is efficient? Share your thoughts using any data from IDX.

2. Discusses the IPO Mitratel issue announced by PT Telekominikasi Indonesia, in June 28, 2021.
Provides the result of a study, which showed whether the share price rose on the announcement
day as well as one week after the announcement date. Taking the clue from the study, is it correct
to conclude that an investor can earn superior risk-adjusted returns by trading on information
about a IPO issue?

Test and analyze whether the behavior of the Indonesia stock market supported Weak, Semi-
Strong, or Strong form of Efficient Market Hypothesis.
Financial Risk Management & Derivative (Arbitrage)

Using Covered Interest Arbitrage

Corbin Co. is a U.S.-based MNC that has $5 million in cash available. It will not need the funds
for one quarter. Corbin notices that the quarterly bank deposit interest rate in the country of
Dreamland is 2% (not annualized) versus only 1% in the United States. Also, there is no credit
risk because the bank deposit is fully backed by the Dreamland government. The currency in
Dreamland (called the Drachma) has been tied to the value of the euro (2 Drachma = 1 euro) for
the last eight years. The quarterly interest rate in the eurozone is 1 percent. The spot rate of euro
is presently $1, while the quarterly forward rate of the euro is $1. The Drachma is presently
valued at $.50, so that 2 Drachma are presently equal to $1. Because the Drachma is tied to the
euro, it fluctuates against the dollar over time in the same manner that the euro fluctuates against
the dollar over time.

a. Explain how Corbin Co. could possibly earn a higher return on its funds by a form of covered
interest arbitrage in which it invests in the Drachma and covers its position with a forward sale in
euros. What would be its expected return over the quarter if the Drachma remains tied to the
euro?

b. Explain the risk to Corbin Co. of engaging in the form of covered interest arbitrage described
in the previous question.
Financial Risk Management & Derivative (Future & Option)

Using Currency Futures and Options

Moonlight Crystal, Inc., is a major importer of crystal glassware from the United Kingdom. The
crystal is sold to prestigious retail stores throughout the United States. The imports are
denominated in British pounds (£). Every quarter, Moonlight needs £500 million. It is currently
attempting to determine whether it should use currency futures or currency options to hedge
imports three months from now, if it will hedge at all. The spot rate of the pound is $1.60. A
three-month futures contract on the pound is available for $1.59 per unit. A call option on the
pound is available with a three-month expiration date and an exercise price of $1.60. The
premium to be paid on the call option is $.01 per unit.

Moonlight is confident that the value of the pound will rise to at least $1.62 in three months. Its
previous forecasts of the pound’s value have been very accurate. Moonlight’s management is
extremely risk averse. Managers receive a bonus at the end of the year if they satisfy minimal
performance standards. The bonus is the same, regardless of how high above the minimum level
a manager’s performance is. If performance is below the minimum, then there is no bonus and
future advancement within the company is unlikely.

a. As a financial manager of Moonlight, you have been assigned the task of choosing among
three possible strategies: (1) hedge the pound’s position by purchasing futures, (2) hedge the
pound’s position by purchasing call options, or (3) do not hedge. Offer your recommendation
and justify it.

b. Assume the previous information provided, except for this difference: Moonlight
has revised its forecast of the pound to be worth $1.57 three months from now. Given this
revision, recommend whether Moonlight should (1) hedge the pound’s position by purchasing
futures, (2) hedge the pound’s position by purchasing call options, or (3) not hedge. Justify your
recommendation. Is your recommendation consistent with maximizing shareholder wealth?
International Financial Management (Direct Foreign Investment)

Bromo, INC. CASE

Consideration of Direct Foreign Investment

For the last year, Bromo, Inc., has been exporting to Thailand in order to supplement its
declining U.S. sales. Under the existing arrangement, Bromo sells 180,000 pairs of roller blades
annually to Entertainment Products, a Thai retailer, for a fixed price denominated in Thai baht.
The agreement will last for another two years. Furthermore, to diversify inter- nationally and to
take advantage of an attractive offer by Colby, Ltd., a British retailer, Bromo has recently begun
exporting to the United Kingdom. Under the resulting agreement, Colby will purchase 200,000
pairs of Speedos, Bromo’ primary product, annually at a fixed price of £80 per pair.

Bromo’ suppliers of the needed components for its roller blade production are located primarily
in the United States, where Bromo incurs the majority of its cost of goods sold. Although prices
for inputs needed to manufacture roller blades vary, recent costs have run approximately $70 per
pair. Bromo also imports components from Thailand because of the relatively low price of
rubber and plastic components and because of their high quality. These imports are denominated
in Thai baht, and the exact price (in baht) depends on prevailing market prices for these
components in Thailand. Currently, inputs sufficient to manufacture a pair of roller blades cost
approximately 3,000 Thai baht per pair of roller blades.

Although Thailand had been among the world’s fastest growing economies, recent events in
Thailand have increased the level of economic uncertainty. Specifically, the Thai baht, which
had been pegged to the dollar, is now a freely floating currency and has depreciated substantially
in recent months. Furthermore, recent levels of inflation in Thailand have been very high. Hence,
future economic conditions in Thailand are highly uncertain.

Ben Dover, Bromo’ chief financial officer (CFO), is seriously considering DFI in Thailand. He
believes that this is a perfect time to either establish a subsidiary or acquire an existing business
in Thailand because the uncertain economic conditions and the depreciation of the baht have
substantially lowered the initial costs required for DFI. Dover believes the growth potential in
Asia will be extremely high once the Thai economy stabilizes.

Although Dover has also considered DFI in the United Kingdom, he would prefer that Bromo
invest in Thailand as opposed to the United Kingdom. Forecasts indicate that the demand for
roller blades in the United Kingdom is similar to that in the United States; because Bromo’ U.S.
sales have recently declined due to the high prices it charges, Dover expects that DFI in the
United Kingdom will yield similar results, especially as the components required to manufacture
roller blades are more expensive in the United Kingdom than in the United States. Furthermore,
both domestic and foreign roller blade manufacturers are relatively well established in the United
Kingdom, so the growth potential there is limited. Dover believes the Thai roller blade market
offers more growth potential.
Bromo can sell its products at a lower price but generate higher profit margins in Thailand than it
can in the United States. This is because the Thai customer has committed itself to purchase a
fixed number of Bromo’ products annually only if it can purchase Speedos at a substantial
discount from the U.S. price. Nevertheless, because the cost of goods sold incurred in Thailand is
substantially below that incurred in the United States, Bromo has managed to generate higher
profit margins from its Thai exports and imports than in the United States.

As a financial analyst for Bromo, Inc., you generally agree with Dover’s assessment of the
situation. However, you are concerned that Thai consumers have not been affected yet by the
unfavorable economic conditions. You believe that they may reduce their spending on leisure
products within the next year. Therefore, you think it would be beneficial to wait until next year,
when the unfavorable economic conditions in Thailand may subside, to make a decision
regarding DFI in Thailand. However, if economic conditions in Thailand improve over the next
year, DFI may become more expensive both because target firms will be more expensive and
because the baht may appreciate. You are also aware that several of Bromo’ U.S. competitors are
considering expanding into Thailand in the next year.

If Bromo acquires an existing business in Thailand or establishes a subsidiary there by the end of
next year, it would fulfill its agreement with Entertainment Products for the subsequent year. The
Thai retailer has expressed an interest in renewing the contractual agreement with Bromo at that
time if Bromo establishes operations in Thailand. However, Dover believes that Bromo could
charge a higher price for its products if it establishes its own distribution channels.

Dover has asked you to answer the following questions:

1. Identify and discuss some of the benefits that Bromo, Inc., could obtain from DFI.

2. Do you think Bromo should wait until next year to undertake DFI in Thailand? What is the
trade-off if Bromo undertakes the DFI now?

3. Do you think Bromo should renew its agreement with the Thai retailer for another three years?
What is the trade-off if Bromo renews the agreement?

4. Assume a high level of unemployment in Thailand and a unique production process employed
by Bromo, Inc. How do you think the Thai government would view the establishment of a
subsidiary in Thailand by firms such as Bromo? Do you think the Thai government would be
more or less supportive if firms such as Bromo acquired existing businesses in Thailand? Why?
International Financial Management (International Financial Market)

Bromo, INC. CASE

Decisions to Use International Financial Markets

As a financial analyst for Bromo, Inc., you are reason- ably satisfied with Bromo’ current setup
of exporting “Speedos” (roller blades) to Thailand. Due to the unique arrangement with Bromo’
primary customer in Thailand, forecasting the revenue to be generated there is a relatively easy
task. Specifically, your customer has agreed to purchase 180,000 pairs of Speedos annually, for a
period of 3 years, at a price of THB4,594 (THB=Thai Baht) per pair. The current direct quotation
of the dollar-baht exchange rate is $.024.

The cost of goods sold incurred in Thailand (due to imports of the rubber and plastic components
from Thailand) runs at approximately THB2,871 per pair of Speedos, but Bromo currently only
imports materials sufficient to manufacture about 72,000 pairs of Speedos. Bromo’ primary
reasons for using a Thai supplier are the high quality of the components and the low cost, which
has been facilitated by a continuing depreciation of the Thai baht against the U.S. dollar. If the
dollar cost of buying components becomes more expensive in Thailand than in the United States,
Bromo is contemplating providing its U.S. supplier with the additional business.

Your plan is quite simple; Bromo is currently using its Thai-denominated revenues to cover the
cost of goods sold incurred there. During the last year, excess revenue was converted to U.S.
dollars at the prevailing exchange rate. Although your cost of goods sold is not fixed
contractually as the Thai revenues are, you expect them to remain relatively constant in the near
future. Consequently, the baht-denominated cash inflows are fairly predictable each year because
the Thai customer has committed to the purchase of 180,000 pairs of Speedos at a fixed price.
The excess dollar revenue resulting from the conversion of baht is used either to support the U.S.
production of Speedos if needed or to invest in the United States. Specifically, the revenues are
used to cover cost of goods sold in the U.S. manufacturing plant, located in Omaha, Nebraska.

Ben Dover, Bromo’ CFO, notices that Thailand’s interest rates are approximately 15 percent
(versus 8 percent in the United States). You interpret the high interest rates in Thailand as an
indication of the uncertainty resulting from Thailand’s unstable economy. Dover asks you to
assess the feasibility of investing Bromo’ excess funds from Thailand operations in Thailand at
an interest rate of 15 percent. After you express your opposition to his plan, Dover asks you to
detail the reasons in a detailed report.

1. One point of concern for you is that there is a trade-off between the higher interest rates in
Thailand and the delayed conversion of baht into dollars. Explain what this means.

2. If the net baht received from the Thailand operation are invested in Thailand, how will U.S.
operations be affected? (Assume that Bromo is currently paying 10 percent on dollars borrowed
and needs more financing for its firm.)
3. Construct a spreadsheet to compare the cash flows resulting from two plans. Under the first
plan, net baht-denominated cash flows (received today) will be invested in Thailand at 15
percent for a 1-year period, after which the baht will be converted to dollars. The expected spot
rate for the baht in 1 year is about $.022 (Ben Dover’s plan). Under the second plan, net baht-
denominated cash flows are converted to dollars immediately and invested in the United States
for 1 year at 8 percent. For this question, assume that all baht-denominated cash flows are due
today. Does Dover’s plan seem superior in terms of dollar cash flows available after 1 year?
Compare the choice of investing the funds versus using the funds to provide needed financing to
the firm.
Recent Topics of Financial Management (FinTech)
May 17, 2021, Gojek and Tokopedia officially merged to become Goto. Gojek and Tokopedia,
both started from startups with different service focuses. GoTo CEO Andre Soelistyo said the
formation of the GoTo Group marked the next growth phase for Gojek, Tokopedia and GoTo
Financial. "The presence of the GoTo Group will also allow us to further drive financial
inclusion in Indonesia and Southeast Asia," the GoTo Group will also combine e-commerce, on-
demand, and financial services, creating the first platform in Southeast Asia to accommodate
these three critical use cases in one ecosystem. Despite the merger, Gojek and Tokopedia will
continue to operate as independent entities within the GoTo Group ecosystem. William also said,
the GoTo Group will have a mission to create large-scale social impacts, including providing
equal opportunities for MSME actors. In your opinion, is the merger decision correct
operationally, trading, both operation and trading, or is there another view that you can provide?
Recent Topics of Financial Management (Crypto)
El Salvador has the potential to be the first country to use Bitcoin-type crypto assets as legal
tender. El Salvador President Nayib Bukele said this week the government would send a bill to
Congress to make Bitcoin transactions legal. his government will work with digital finance
company to prepare the infrastructure and logistics for the regulation. “More than 70 percent of
El Salvador's population does not have a bank account. They are not registered in the financial
system.” Currently, El Salvador only accepts US Dollars as the legal currency of payment in the
country located in Central America. For information, central banks in various countries are
currently preparing digital currency or Central Bank Digital Currency. This was done in response
to the rapid growth of crypto asset market capitalization, especially since the outbreak of the
Covid-19 pandemic.

On the other hand, the Indonesian government officially allows trading of digital currencies or
cryptocurrencies such as Bitcoin on futures exchanges. The Commodity Futures Trading
Regulatory Agency (CoFTRA) recognized 229 cryptocurrencies in the country. This
acknowledgment is stated in the Commodity Futures Trading Supervisory Agency Regulation
Number 7 concerning Stipulation of the List of Crypto Assets that can be Traded in the Physical
Crypto Asset Market. The regulation came into effect on December 17, 2020. The determination
of this type of cryptocurrency asset is based on two approaches. First, the juridical approach
(looking at the 500 coin market cap/CMC rating) in accordance with the provisions of Article 3
paragraph (2) letter c of Perba Number 5 of 2019. Second, the CoFTRA process hierarchy
analysis (AHP) assessment approach while still paying attention to security aspects, team
profiles and members of the developing team, governance of the blockchain system, scalability
of the blockchain system, a roadmap that describes the development plan of a blockchain system
that can be verified, and a standard score of 6.5 Thus, it is mandatory to delist the types of crypto
assets outside of that amount (229 cryptocurrencies), which is followed by certainty of settlement
steps for customers. In your opinion, what will be the impact if cryptocurrency becomes one of
the legal currency of payment in Indonesia? Or is it appropriate only to the extent of traded
assets?
Islamic Finance (Islamic Financial Institutions)
In your opinion, are Islamic financial institutions in Indonesia classified as advanced, developing
or stagnant? state the reasons (data and fact) for these conditions along with solutions so that the
institution becomes more developed or can be free from stagnant conditions.
Islamic Finance (Islamic Financial Market)
The Indonesian Stock Exchange (IDX) noted that the development of the Islamic stock market in
Indonesia has experienced very significant growth in the last five years. In terms of
capitalization, the number of Islamic shares to the number of investors is increasing. IDX
President Director, Inarno Djajadi, explained that in terms of market capitalization, the domestic
Islamic stock market has reached IDR 3.5 trillion, equivalent to 47.5 percent of the total
capitalization recorded by the IDX in the past five years. This reflects that investors' enthusiasm
for Islamic stocks is very promising. In your opinion, what causes the development of Sharia
shares in Indonesia to be significant, both in terms of issuers and investors?