St. Joseph’s College of Commerce (Autonomous)

Supplementary Examination- October 2011

MCOM – II Semester

 

SECURITIES ANALYSIS AND PORTFOLIO MANAGEMENT

Duration:  3 Hours                                                                                         Max. Marks: 100

Section A

1. Answer ALL the questions in one or two sentences                              (10×2=20)
2. Satish invests Rs.10,000/- today. The rate of interest is 8% compounded annually. What will be the value of his investment after 5 years?
3. What is downward trend line?
4. What does a candlestick chart represent?
5. Fundamental analysis is commonly known by another name. What is it?
6. Investment in gilt edges securities carry a high element of risk. Is the statement true?
7. What is speculation?
8. What is unsystematic risk?
9. What is a futures contract?
10. What is a fund of fund?
11. Which MF in India launched the Gilt plan and in which year?

Section B

1. Answer any FOUR questions (4×5=20)

1. Mr. Patel buys 1050 shares of Grasim in July 2001 for INR 250 and sells it for INR 480 in April 2002. What kind of an investor is he? What are the various styles of investing?
2. What are the assumptions of CAPM?
3. Briefly explain the E-I-C framework of Fundamental Analysis.

14. Akash is an Investment consultant with rich experience in equity research and portfolio management. He was requested by a client to give a presentation on equity valuation. You as an executive assistant prepare for him the following:

 

• The equity stock is currently selling for INR 30 per share. The dividend expected next year is INR 2.00. The investor’s required rate of return on this stock is 15%. If the constant growth model applies, what is the expected growth rate?

 

• The current dividend on an equity share is INR 5.00. The present growth rate is 50%. However this will decline linearly over a period of 8 years and then stabilize at 10%. What is the intrinsic value per share if the investors require a return of 18% from its stock?

 

15. (a) ABC Co. has a Days Sales Outstanding ratio of 60 days. Total credit sales for the year were $2,400,000. What is the balance in accounts receivable?

 

( b) If a firm has interest expenses of $10,000 per year, sales of $700,000, a tax rate of 40%, and a net profit margin of 7%, what is the firm’s times interest coverage ratio?

 

16. Explain the relationship between coupon rate, required yield and price of a bond.

 

Section C

• Answer any THREE of the following      (3×15 = 45)

1. Write a note on industry analysis and on the study of the structure and characteristics of an industry.
2. The returns on the equity stock of Auto Electricals Limited and the market portfolio over a 11 year period are given below:

Year	Return on Auto Electricals Ltd. (%)	Return on Market Portfolio (%)
1	15	9
2	16	12
3	10	6
4	-15	4
5	-5	16
6	14	11
7	10	10
8	15	12
9	12	9
10	-4	8
11	-2	12

Calculate the beta for the stock of Auto Electricals Limited.

1. (a) Assume Rs. 1000 is invested each month for 6 months in the units of a certain SIP. The next table shows the declining prices of the units of the scheme from January through June.

 

 

Date of Investment	Monthly Investment	Price	Units
1st Jan	1000	32	31
1st Feb	1000	22	45
1st Mar	1000	22	45
1st Apr	1000	18	56
1st May	1000	16	63
1st Jun	1000	11	91

Explain how the concept of RCA helps an investor?

• How are options traded and settled in the Indian stock exchanges?

(8+7)

1. (a) Give a brief explanation of the different types of equity valuation models.

• Consider the following information of three mutual funds A,B and C and the market.

	Mean Return	Standard Deviation (%)	Beta
A	12	18	1.1
B	10	15	0.9
C	13	20	1.2
Market Index	11	17	1.0

The mean risk free rate was 6%. Calculate the Treynor measure and Sharpe measure to evaluate the MF performance.

(8+7)

1. (a) In deciding whether to use forward, futures, or options contracts for hedging, what are the points which a firm should consider?

• What are the various methods of classification of Mutual Funds on the basis of investment objective?

(8+7)

 

Section D

1. Case study – Compulsory Question.                                 (15 marks)

CASE STUDY

• Technical analysts believe that certain formations or patterns observed on the bar chart or line chart have a predictive value. Explain how the following patterns help such an analyst to predict stock behavior and summarize the importance of technical analysis.

 

 

 

 

 

 

 

 

 

 

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