Page 397 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Supplementary objective test questions

4 Shoot Co has an interest cover greater than one and gearing (debt/debt +
equity) of 50%.

What will be the impact on interest cover and gearing of issuing shares to
repay half the debt?

Interest cover Gearing

A Rise Fall

B Rise Rise

C Fall Fall

D Fall Rise

5 The current spot exchange rate between the British pound (GBP) and the Euro
(EUR) is GBP/EUR 1.2020 (that is GBP 1 = EUR 1.2020).

The UK interest rate is 3.00% per annum and the eurozone interest rate is
5.00% per annum.

What is the expected exchange rate in six months’ time?
(GBP 1 = EUR…………..)

A 1.1791

B 1.1903

C 1.2138

D 1.2253

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