LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com DEGREE EXAMINATION – COMMERCE

AT 08

FIFTH SEMESTER – NOV 2006

CO 5401 – PERSONAL INVESTMENT

(Also equivalent to COM 401)

 

 

Date & Time : 08-11-2006/9.00-12.00   Dept. No.                                                       Max. : 100 Marks

 

 

PART – A

                                                                                                                           (10 x 2 = 20)

Answer ALL questions

 

1. Who is a potential investor?

 

2. What is meant by time value of money?

 

3. Narrate the term immunization.

 

4. Why do investors add real estate in their portfolio?

 

5. Define the term credit rating.

 

6. Write a note on sweat equity.

 

7. Mr. Michael plans to send his son for MBA in LIBA. He expects the cost of these

studies to be  Rs.500000.  How  much  should  he  save annually to have a sum of

Rs.500000 at the end of 10 years, if the interest rate is 12%.

 

8. At the time of his retirement, Mr. Basheer is given a choice between 2 options:

• An annual pension of Rs.40000 as long as he lives
• A lumpsum of Rs.200000 at the time of his retirement.

Mr. Basheer expects to live for 15 years and the interest rate is estimated at 15%.

Which option should he choose?

 

9. Beta is 0.7, Rm is 16%, Rf is 8%. Find out the expected rate of return of the security.

Also calculate the Beta of the security which has an expected return of 19%.

 

10. A bond of  Rs.10000,  bearing  a  coupon  rate  of   12% p.a.  payable  quarterly  is

redeemable after 2.5 years at par. What will be the value of bond, if the required rate

of return is 16% ?

 

PART – B

                                                                                                                           (5 x 8 = 40)

Answer any FIVE questions

 

11. What are the secondary objectives of investment?

 

12. “Stocks are considered to be risky, but bonds are not”. This is not fully correct.

Elucidate.

 

13. What is a Mutual Fund? Briefly explain its merits.

 

14. Explain the methods of valuation of Equity Shares.

 

15. Give an account of working of depository system.

 

16. The expected return and their respective probabilities from investment in Securities

A and B are as follows:

Security A		Security B
Expected return	Probability	Expected return	Probability
6	0.10	4	0.10
7	0.25	6	0.20
8	0.30	8	0.40
9	0.25	10	0.20
10	0.10	12	0.10

 

 

 

 

 

 

 

 

Calculate  the standard deviation of the expected return and comment on the risk of

the securities.

 

17. As an investor you expect a interest rate of 18% p.a. M/s. Mothiram Investment Ltd.,

advertises that it will pay a lump sum of Rs.50000 at the end of 6 years, if you deposit

annually  Rs. 5000.  Calculate the rate of interest  offered by the  NBFC?  Would you

accept the offer? Comment.

 

18. The market value of a Rs.1000 par value  bond  carrying  a coupon rate of 12% and

maturing  after 7 years at  Rs.750.  What is the YTM on the bond ? Also compute the

approximate YTM using equation.

 

PART – C

                                                                                                                           (2 x 20 = 40)

Answer any TWO questions

 

19. Discuss the process of investment with relevant examples.

 

20. Explain the factors affecting security analysis.

 

21. Describe the following terms: (4 marks each)

• Scripless Trading
• Public Provident Fund
• Capital Asset Pricing Model
• Diversifiable risk of a security

(e) Features of Warrants

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