LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

     B.Com. DEGREE EXAMINATION – CORPORATE SECRETARYSHIP

GF 18

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

 

1. Define investment.
2. Who is a gambler?
3. What does Net Asset Value mean?
4. Write a note on Bonus Shares.
5. What is Security Market Line?
6. Define the term Beta.
7. A bond of Rs.5000 with a 10% coupon rate matures in 7 years and currently

sells at 97.5%. Calculate the YTM.

8. 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.

9. 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

 

11. Briefly explain the secondary objectives of investment.
12. What are the economy-wide factors that affect the fundamental analysis?
13. Define Capital Asset Pricing Model. Bring out its basic assumptions.
14. Differentiate constant rupee plan from constant ratio plan.
15. “Investment in Mutual funds are better than equity shares” – Comment.
16. 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

 

 

 

17. 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

 

18. 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

 

19. 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.

 

21. 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?

 

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       LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – CORPORATE SECRETARYSHIP

IR 18

SIXTH SEMESTER – April 2009

BC 6602 – PORTFOLIO MANAGEMENT

 

 

 

Date & Time: 21/04/2009 / 9:00 – 12:00     Dept. No.                                                       Max. : 100 Marks

 

 

SECTION – A

1. Answer all the questions: 10 x 2 = 20 Marks

 

1. What are the different types of portfolios?
2. What do you mean by speculation?

3. What is a passive portfolio?
4. What is meant by systematic risk?
5. What is need for diversification in portfolio?
6. Define the term SML.
7. Define the term Bond.
8. What are preference shares?
9. What is Constant ratio plan?
10. 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

1. Answer any FIVE questions only: 5 x 8 = 40 Marks

 

11. Define Investment. Explain the process of investment.
12. 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?

1. What are the salient features of Constant rupee value plan?

 

 

1. 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

1. Explain in detail the various investment avenues.
2. Explain with examples the concept of systematic and unsystematic risks.
3. What is meant by Capital Asset Pricing Model?
4.  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

 

1. Stocks L and M have yielded the following returns for the past two years:

 

Years	Returns (%)
	L	M
2007	12	14
2008	18	12

 

1. What is the expected return on the portfolio made up of 60% of L and 40% of M?
2. Find out the standard deviation of each stock.
3. What is the covariance and co-efficient of correlation between L and M?
4. What is the portfolio risk of a portfolio made up of 60% of L and 40% of M?

 

1. 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.

 

1. Explain in detail the Economic, Industry and Company analysis.

 

 

 

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – CORPORATE SEC.

SIXTH SEMESTER – APRIL 2011

BC 6602 – PORTFOLIO MANAGEMENT

 

 

 

Date : 07-04-2011              Dept. No.                                        Max. : 100 Marks

Time : 9:00 – 12:00

 

PART –A

ANSWER ALL QUESTIONS                                                                                      (10 x 2 = 20marks)

1. Define the term ‘Portfolio’.
2. Differentiate between σ and β as a measure of risk.
3. State the components of Rate of return.

4. What is meant by Yield to Maturity?
5. Write short notes on Diversification.
6. What are the risks associated with investment in Bonds?
7. Give the meaning of ‘formula plans’
8. A 4 year bond with 7% coupon rate which matures at Rs.1000 is currently traded at Rs.905. Calculate YTM if the investor’s required rate is 10%.
9. A stock has a required rate of return of 11% as per CAPM. Market return = 10% and risk free return = 5%. Calculate Beta and state whether the stock is defensive or aggressive.
10. Evaluate the performance of the following portfolio as per Treynor’s Ratio:

Portfolio Return, R_P = 50%            Market return, R_M = 30%

σ _P = 25%                                    σ_M = 20%

Risk free rate R_f  = 10%

PART – B

ANSWER ANT FIVE QUESTIONS                                                                         (5 x 8 = 40marks)

 

1. Bring out the objectives of an investment.
2. What are the stages in the Industry Life Cycle? Explain the significance of this concept to an investor.
3. What are the fixed income securities available to an investor?
4. Briefly explain the variables that affect the valuation of Bonds.
5. What are the assumptions of CAPM? Are there any limitations of this model?
6. Stocks R & S display the following return over the past three years.

Year                          R(%)                S(%)

2004                         10                    12

2005                         16                    18

2006                         12                     5

What is the expected risk and return of Portfolio made up of 40% of R and 60% of  S?

 

1. The return of two assets under four possible state of nature is given below.

State of nature	Probability	Return on asset 1	Return on asset 2
1	0.10	5%	0%
2	0.30	10%	8%
3	0.50	15%	18%
4	0.10	20%	26%

 

a)What is the standard deviation of the return on asset 1 & asset 2?

 

1. b) What is the covariance between the return on asset1& asset 2?

 

18. The following information is available in respect of securities A and B:

Security    β         Expected return     Risk premium

A        0.50                 ?                          4%

B        1.75                20%                       ?

 

On the basis of the following information, find out whether the following

securities are over  – priced or under priced:

security	β	Expected return(%)
I	2.00	20
II	0.75	14
III	1.25	15
IV	-0.25	5
V	3.25	31

 

 

 

 

 

 

 

PART – C

ANSWER ANY TWO QUESTIONS                                                                       (2 x 20 = 40 marks)

 

1. Systematic risk cannot be controlled while unsystematic risk can be reduced. Elucidate.
2. Explain the concept of Economic analysis for Investment decision.
3. After a thorough analysis of the aggregate stock market and the Stock of TMT company, you develop the following opinion:

Likely returns

Economic conditions	Aggregate market	TMT	Probability
Good	16%	20%	0.4
Fair	12%	13%	0.4
Poor	3%	– 5%	0.2

 

At present the risk free rate is equal to 7%. Would an investment in TMT be

wise?

 

 

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – CORPORATE SEC.

SIXTH SEMESTER – APRIL 2012

BC 6602 – PORTFOLIO MANAGEMENT

 

 

 

Date : 18-04-2012              Dept. No.                                        Max. : 100 Marks

Time : 1:00 – 4:00

 

PART – A

                                   

Answer All the Questions:                                                                                         (10×2 =20 marks)

 

1. Briefly explain the objectives of investment.
2. List the different types of risk.
3. What is Beta?
4. Explain Constant ratio plan.
5. What is meant by warrants?
6. Why is industry analysis important?
7. A bond of Rs.1000 face value, bearing a coupon rate of 12% will mature after 7 years. What is the value of the bond if the discount rate is 14 %?
8. S Ltd would pay Rs.2.50 as dividend per share for the next year and expected to grow indefinitely at 12 % what would be the equity value if the investor requires 20 % return?
9.  The expected return of the market is 15% and equity’s beta is 1.4. The risk free rate of interest is 7 %. Estimate the stock return using CAPM.
10.  Net profit after tax Rs.Two lakhs, Equity share capital (Rs.10 each) Rs.One lakh. 10 % Preference shares (Rs. 10 each) Rs. Two lakhs. Calculate EPS.

 

PART – B

                                    

Answer any FIVE Questions:                                                                                   (5×8 =40 marks)

 

1. Differentiate Investments and speculations.
2. What are the statistical tools used to measure the risk of the securities return? Explain.
3. Explain CAPM theory
4. Write short note on a) sweat equity b)  zero coupon bonds c) treasury bills
5. Discuss any four factors considered to be most important in appraising companies in different industries.

 

 

 

 

1. Given the data below on two companies A and B.  Calculate the expected return from the two companies and standard deviation as a risk measure of companies. Which one is better for return and risk estimates.

 

Outcome	Company A		Company B
	Expected return	Probability	Expected return	Probability
1	6	0.3	8	0.2
2	10	0.5	14	0.5
3	12	0.2	18	0.3

 

 

1. Stocks of M and N have the following parameters

 

	Stock M	Stock N
Expected return	20	30
Expected	16	25
Covariance MN	20

 

Is there any advantage of holding a combination of M and N?

 

1. A Rs.100 par value bond bearing a coupon rate of 11 % matures after 5 years. The expected yield to maturity is 15 %. The present market price is Rs.72. Can the investor buy it ?

 

PART – C

                                  

Answer any TWO Questions:                                                                                  (2×20 =40 marks)

 

1. Explain the steps involved in investment management process and the sources of investment information.

 

1. What is fundamental analysis? Elaborate.

 

1. The following three portfolios provide the particulars given below:

 

 

Portfolio	Average annual return	Standard Deviation	Correlation Coefficient
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.

1. Rank these portfolios using Sharpe’s and Treynor’s methods.
2. Compare both the indices.

 

 

 

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