LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – COMMERCE

QB 13

FIFTH SEMESTER – November 2008

CO 5401 – PERSONAL INVESTMENT

 

 

 

Date : 05-11-08                     Dept. No.                                        Max. : 100 Marks

Time : 9:00 – 12:00

SECTION-A

(Answer ALL questions)                                              (10X2=20)

1. What do you mean by investment?
2. What is bonus share?
3. Explain the meaning of “Time value of money”.
4. A-owns Rs.1,000 Face value bond with 5-years to maturity. The bond has an annual coupon

rate of Rs.75.The bond is currently priced at Rs.970 at the discount rate of 10%.

Should A sell or hold the bond.

 

5. What is the present value cash stream if the discount rate is 14%.

 

Year	0	1	2	3	4
Cash flow(Rs)	5,000	6,000	8,000	9,000	8,000

 

6. Can you suggest a suitable formula to calculate the return on the stock.?
7. Define “ yield to maturity”.
8. Should investment in gold be considered as good investment option? Give reasons for your answer.
9. What is meant by deep discount bond? 10.Write a short note on government securities.

 

SECTION-B

(Answer any FIVE questions)                                         (5X8=40)

11.Compare and contrast between investment and speculation.

 

12.Briefly explain the steps involved in “investment process”.

 

13.Write a brief on the following

1. a) Systematic risk b) Unsystematic risk.

 

14. The market price of an equity share is Rs.100.Following information is available in respect of

dividends , market price and the expected condition of the market after one year.

 

 

Market condition	Probability	Market price (Rs)	Dividend Per share(Rs)
Good Normal Bad	0.25 0.50 0.25	115 107 97	9 5 3

Find out the expected return and variability of returns of the equity share.

 

 

15. A Rs.50,000 bond with 10% coupon rate matures in 8 years and currently sold at 97%

If the bond is a desirable investment for an investor whose required rate of return is 11%,

Calculate the present value of bond and Yield to maturity of the bond.

 

16.List out and explain the classification of life insurance policies .

 

17.Enlist and explain the various fixed income bearing securities.

 

18.Bring out the three approaches available to determine the value of real estate assets.

 

 

SECTION-C

 

(Answer any TWO questions)                              (2×20=40)

 

19.a) Calculate the market sensitivity index and the expected return on the investment from the

following data:

 

Standard deviation of an asset                              2.5%

Market standard deviation                                    2%

Risk free return                                                    13%

Expected return on the portfolio                          15%

Correlation coefficient of portfolio with market  0.8

What will be the expected return on the portfolio if portfolio beta is 0.5% and the risk free

Return is 10%?                                                                                                      (8)

15. b) A company has common stock outstanding in the market with the price earnings ratio of

The annual expected growth in earnings, dividends and price is 7%.The earning per share

Is Rs.2.50, dividend pay out is 60% and the investor wants to hold the stock for 4 years. The

Required rate of return is 15%. What would be the present value?                       (12)

 

20.Discuss in detail the meaning and classification of mutual funds.

 

21.What do you understand by CAPM-theory and explain the assumptions and limitations

of CAPM-theory.

 

 

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