LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
B.Com. DEGREE EXAMINATION – CORPORATE SECRETARYSHIP
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SIXTH SEMESTER – April 2009
BC 6602 – PORTFOLIO MANAGEMENT
Date & Time: 21/04/2009 / 9:00 – 12:00 Dept. No. Max. : 100 Marks
SECTION – A
- Answer all the questions: 10 x 2 = 20 Marks
- What are the different types of portfolios?
- What do you mean by speculation?
- What is a passive portfolio?
- What is meant by systematic risk?
- What is need for diversification in portfolio?
- Define the term SML.
- Define the term Bond.
- What are preference shares?
- What is Constant ratio plan?
- An investor purchased a bond at a price of Rs.900 with Rs.100 as coupon payment and sold it at Rs.1,000. What is his holding period return?
SECTION – B
- Answer any FIVE questions only: 5 x 8 = 40 Marks
- Define Investment. Explain the process of investment.
- Following information is available in respect of the rate of return of two securities
A and B in different economic conditions:
| Condition | Probability | Rate of return | Rate of return |
| Security A | Security B | ||
| Recession | 0.20 | – 0.15 | 0.20 |
| Normal | 0.50 | 0.20 | 0.30 |
| Boom | 0.30 | 0.60 | 0.40 |
Find out the expected returns and the standard deviations for these two securities. Suppose, an investor has Rs.20,000 to invest. He invests Rs.15,000 in Security A and balance in Security B, what will be the expected return of the portfolio?
- What are the salient features of Constant rupee value plan?
- Pearl and Diamond are the two mutual funds. Pearl has a mean success of 0.15 and Diamond has 0.22. The Diamond has double the beta of Pearl fund’s 1.5. The standard deviations of Pearl and Diamond funds are 15% & 21.43%. The mean return of market index is 12% and its standard deviation is 7. The risk free rate is 8%.
Compute the Jensen Index for each fund
- Explain in detail the various investment avenues.
- Explain with examples the concept of systematic and unsystematic risks.
- What is meant by Capital Asset Pricing Model?
- Explain the following:
- penny stocks (b) Demat (c) Dividend yield (d) Beta
SECTION – C
III. Answer any TWO questions only: 2 x 20 = 40 Marks
- Stocks L and M have yielded the following returns for the past two years:
| Years | Returns (%) | |
| L | M | |
| 2007 | 12 | 14 |
| 2008 | 18 | 12 |
- What is the expected return on the portfolio made up of 60% of L and 40% of M?
- Find out the standard deviation of each stock.
- What is the covariance and co-efficient of correlation between L and M?
- What is the portfolio risk of a portfolio made up of 60% of L and 40% of M?
- The following three portfolios provide the particulars given below:
| Portfolio | Average Return | Std. Deviation | Correlation |
| A | 18 | 27 | 0.8 |
| B | 14 | 18 | 0.6 |
| C | 15 | 8 | 0.9 |
| MARKET | 13 | 12 | — |
Risk free rate of interest is 9. Rank these portfolios using Sharpe and Treynor methods.
- Explain in detail the Economic, Industry and Company analysis.
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