LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
B.Com. DEGREE EXAMINATION – CORPORATE SECRETARYSHIP
|
SIXTH SEMESTER – APRIL 2008
BC 6602 / CR 6602 – PORTFOLIO MANAGEMENT
Date : 23/04/2008 Dept. No. Max. : 100 Marks
Time : 9:00 – 12:00
PART – A
(10 x 2 = 20)
ANSWER ALL QUESTIONS
- Define investment.
- Who is a gambler?
- What does Net Asset Value mean?
- Write a note on Bonus Shares.
- What is Security Market Line?
- Define the term Beta.
- A bond of Rs.5000 with a 10% coupon rate matures in 7 years and currently
sells at 97.5%. Calculate the YTM.
- Output 100000 units. Selling Price Rs.4 per unit, Variable Cost Rs.2 per unit,
Fixed Cost Rs.40000. Its capital structure consists of 9% Bank Loan Rs.1 lakh
and Equity share Capital @ Rs.10, Rs.5 lakhs. Tax rate 40%. Calculate EPS.
- Risk free rate is 7%. The market risk premium is 10.5% and the Beta of the
security is 1.5. Calculate the expected return of the security under CAPM.
10.The market price of an equity share is Rs.100. Following information is
available in respect of dividends, market price and the expected market
condition after one year.
| Market Condition | Probability | Market Price (Rs.) | Dividend (Rs.) |
| Good | 0.25 | 115 | 9 |
| Normal | 0.5 | 107 | 5 |
| Bad | 0.25 | 97 | 3 |
Find out the expected return.
PART – B
(5 x 8 = 40)
ANSWER ANY FIVE QUESTIONS
- Briefly explain the secondary objectives of investment.
- What are the economy-wide factors that affect the fundamental analysis?
- Define Capital Asset Pricing Model. Bring out its basic assumptions.
- Differentiate constant rupee plan from constant ratio plan.
- “Investment in Mutual funds are better than equity shares” – Comment.
- Two securities, X and Y have variance of 13 and 12 and the expected returns
of 15% and 12% respectively. The covariance between the returns is 3. Find
out the return and risk of the following portfolios:
| Security X | Security Y | |
| (I) | 0.2 | 0.8 |
| (ii) | 0.7 | 0.3 |
| (iii) | 0.5 | 0.5 |
- Six Portfolios experienced the following results during a 7-year period:
| Portfolio | Average Return | Standard Deviation | Correlation with market |
| I | 18.6 | 27 | 0.81 |
| II | 14.8 | 18 | 0.65 |
| III | 15.1 | 8 | 0.98 |
| IV | 22 | 21.2 | 0.75 |
| V | – 9 | 4 | 0.45 |
| VI | 26.5 | 19.3 | 0.63 |
The risk free rate of interest is 9% and the market risk is 12%. Rank these
portfolios using (a) Sharpe’s and (b) Treynor’s Ratio
- Growth Fund, Trade bills and BSE Sensex had the following returns over the
past 5 years.
| Year | Growth Fund Returns % | Trade Bills Returns % | BSE Sensex Returns % |
| 2003 | 9 | 6 | 6 |
| 2004 | – 6 | 10 | – 5 |
| 2005 | 14 | 8 | 11 |
| 2006 | 12 | 7 | 10 |
| 2007 | 16 | 9 | 13 |
What is the predictive ability of the fund?
PART – C
(2 x 20 = 40)
ANSWER ANY TWO QUESTIONS
- Explain the systematic and unsystematic risk with relevant examples.
20.What are the various forms of investment alternatives? Give a detailed
account of any eight.
- The following information is available in respect of investment in A & B
| Conditions | Probability | Returns from A (%) | Returns from B (%) |
| DULL | 0.2 | 10 | 6 |
| STABLE | 0.5 | 14 | 15 |
| GROWTH | 0.3 | 20 | 11 |
(i) Calculate:
- Expected return and standard deviation of the investments A & B
- Covariance
- Correlation
(ii) What will be return if total investment is divided one half in each?