LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034 M.Com DEGREE EXAMINATION – COMMERCE
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THIRD SEMESTER – NOV 2006
CO 3802 – SECURITY ANALYSIS & PORTFOLIO MANAGEMENT
Date & Time : 25-10-2006/9.00-12.00 Dept. No. Max. : 100 Marks
SECTION – A
Answer ALL questions: ( 10 x 2 = 20 )
- What is stock split?
- What is Formula plan?
- Distinguish between systematic and unsystematic risk?
- What are the problems encountered in portfolio revision?
- What do you mean by portfolio diversification?
- Bring out the unique feature of strong form of Efficient Market theory?
- What is derivative?
- What do you mean by Listing of shares.
Give any two differences between investment and speculation.
- In what way investment in financial asset is superior to investment in physical asset?
SECTION – B
Answer any five questions: ( 5 x 8 = 40 )
- Discuss the key macroeconomic variables and their impact on stock market.
- Give a brief account of various participants involved in securities market?
- What are the various policies of Portfolio management?
- What are the assumptions of Markowitz theory?
- There are two securities X and Y, which provide you the following returns and their
probabilities.
| Security X | Security Y | ||
| Return | Probability | Return | Probability |
| 30% | 0.10 | -20% | 0.05 |
| 20% | 0.20 | 10% | 0.25 |
| 10% | 0.40 | 20% | 0.30 |
| 5% | 0.20 | 30% | 0.30 |
| -10% | 0.10 | 40% | 0.10 |
Calculate the expected rate of security X and security Y.
- The cost of capital and rate of return of a company is 10% and 15%. The company has one
million equity shares of 10 each and its EPS is Rs.5 per share. Calculate the value under
Walter when (a) retention is 100% (b) retention is 50% and (c) no retention.
- An investor is seeking the price to pay for a security whose SD is 3%. The correlation
coefficient of the security in the market is 0.8. The market SD is 2.2%. The return from
Government securities is 5.2%. The return from market portfolio is 9.8%. Find the required
rate of return using capital asset pricing model.
- Ram & Co. has at present outstanding 50000shares selling at Rs.100 each. The company is
contemplating to declare a dividend of Rs.5 per share at the end of the current year. The
captialisation rate of company is 10%. The management expects to earn a net income of
Rs.5,00,000 and decides to invest Rs.10,00,000 in a project. Show the price of the share at
the end of the year if (a) a dividend is declared and (b) a dividend is not declared.
SECTION – C
Answer any TWO questions: ( 2 x 20 = 40 )
- Give an elaborate account of various factors involved in a company analysis?
- Describe the factors and the principles considered in the portfolio management.
- (a) What are criteria to be observed for the proper selection of portfolio?
- Give a brief account of the factors responsible for causing internal risk in investment?
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