St. Joseph’s College of Commerce M.I.B. 2011 IV Sem Securities Analysis And Portfolio Management Question Paper PDF Download

St. Joseph’s College of Commerce (Autonomous)

 

End Semester Examination – April 2011

M.Com – IV Semester

Strategic Financial Management

 

Duration: 3 Hours                                                                                   Max. Marks: 100

 

Section – A

 

I)Answer TEN questions.  Each carries 2 marks.                                            (10×2=20)

 

  • What is a Strategy?
  • What is the meaning of Cost of Capital?
  • What is Demerger?
  • What is Ethical Brand Equity?
  • What is the meaning of Acquisition?
  • What is role of Executive Compensation under value Based Management?
  • What is the main objective of BCG Approach?
  • What is the meaning of Enterprise Governance?
  • What is the meaning of Indexed Stock options?
  • Differentiate between EPS & EBIT?
  • What is the importance of Market to Book Ratio?
  • Explain the acronym CFROI.

 

Section – B

 

II)Answer any FOUR questions.  Each carries 5 marks.                            (4×5=20)

 

  • Write a short note on Balanced Score Card.
  • Differentiate between MVA & EVA.
  • Explain the areas of Value thinking with reference to Mckinsey Approach.
  • What are the features of Strategic Financial Management?
  • What are the kinds of takeover?
  • What are the Ethical Dilemmas faced by a Strategic Financial Manager?

 

Section – C

 

III) Answer any THREE questions.  Each carries 15 marks.                      (3×15=45)

 

  • Briefly explain the interface of financial policy & strategic policy.
  • Explain the Concept involved in EBITDA.
  • What are the different approaches in calculation of Corporate Approach?
  • What are the factors affecting Dividend Policy?
  • What are the strategies used against anti-take over bids.

 

 

Section – D

 

  1. IV) Compulsory

question –  Case Study                                                            (15 marks)

 

  • Mergers and Acquisition – A Case Study and Analysis of HP-Compaq Merger

HP

It all began in the year 1938 when two electrical engineering graduates from Stanford University called William Hewlett and David Packard started their business in a garage in Palo Alto. In a year’s time, the partnership called Hewlett-Packard was made and by the year 1947, HP was incorporated. The company has been prospering ever since as its profits grew from five and half million dollars in 1951 to about 3 billion dollars in 1981. Starting with manufacturing audio oscillators, the company made its first computer in the year 1966 and it was by 1972 that it introduced the concept of personal computing by a calculator first which was further advanced into a personal computer in the year 1980. The company is also known for the laser-printer which it introduced in the year 1985.

 

Compaq

The company is better known as Compaq Computer Corporation. This was company that started itself as a personal computer company in the year 1982. It had the charm of being called the largest manufacturers of personal computing devices worldwide. The company was formed by two senior managers at Texas Instruments. The name of the company had come from-“Compatibility and Quality”. The company introduced its first computer in the year 1983 after at a price of 2995 dollars. In spite of being portable, the problem with the computer was that it seemed to be a suitcase. Nevertheless, there were huge commercial benefits from the computer as it sold more than 53,000 units in the first year with a revenue generation of 111 million dollars.

 

Reasons for the Merger

 

Carly Fiorina, who became the CEO of HP in the year 1999, had a key role to play in the merger that took place in 2001. She was the first woman to have taken over as CEO of such a big company and the first outsider too. She worked very efficiently as she travelled more than 250,000 miles in the first year as a CEO. Her basic aim was to modernize the culture of operation of HP. She laid great emphasis on the profitable sides of the business. This shows that she was very extravagant in her approach as a CEO. In spite of the growth in the market value of HP’s share from 54.43 to 74.48 dollars, the company was still inefficient. This was because it could not meet the targets due to a failure of both company and industry. HP was forced to cut down on jobs and also be eluded from the privilege of having Price Water House Cooper’s to take care of its audit. So, even the job of Fiorina was under threat. This meant that improvement in the internal strategies of the company was not going to be sufficient for the company’s success. Ultimately, the company had to certainly plan out something different. So, it

 

was decided that the company would be acquiring Compaq in a stock transaction whose net worth was 25 billion dollars. Initially, this merger was not planned. It started with a telephonic conversation between CEO HP, Fiorina and Chairman and CEO Compaq, Capellas. The idea behind the conversation was to discuss on a licensing agreement but it continued as a discussion on competitive strategy and finally a merger. It took two months for further studies and by September, 2001, the boards of the two companies approved of the merger. In spite of the decision coming from the CEO of HP, the merger was strongly opposed in the company. The two CEOs believed that the only way to fight the growing competition in terms of prices was to have a merger. But the investors and the other stakeholders thought that the company would never be able to have the loyalty of the Compaq customers, if products are sold with an HP logo on it. Other than this, there were questions on the synchronization of the organization’s members with each other. This was because of the change in the organization culture as well. Even though these were supposed to serious problems with respect to the merger, the CEO of HP, Fiorina justified the same with the fact that the merger would remove one serious competitor in the over-supplied PC market of those days. She said that the market share of the company is bound to increase with the merger and also the working unit would double.

 

Question:

 

Critically analyse the decision for merger in the above case and put forward your justifications.

 

 

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St. Joseph’s College of Commerce M.Com. 2011 II Sem Securities Analysis And Portfolio Management Question Paper PDF Download

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.
  1. 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?

 

  1. (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?

 

  1. 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.

 

 

 

 

 

 

 

 

 

 

St. Joseph’s College of Commerce M.I.B. 2012 IV Sem Securities Analysis And Portfolio Management Question Paper PDF Download

St. Joseph’s College of Commerce (Autonomous)

End Semester Examination- April 2012

MIB – IV Semester

 SECURITIES ANALYSIS AND PORTFOLIO MANAGEMENT

Duration:  3 Hours                                                                                         Max. Marks: 100

Section – A

  1. Answer ANY SEVEN questions.                                                         (7×5=35)
  1. Mr. Kishor buys 1050 shares of SBI 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?
  1. Arun 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 equity share is expected to provide a dividend of INR 2.00 and fetch a price of INR 18.80 a year hence. What price would it sell for now if investors’ required rate of return is 12%?

 

  1. (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?

 

  • 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?
  1. Write a note on Fund of Funds.
  2. Write a note on Markowitz model.
  3. Differentiate between CAPM & ABT.
  4. Give a summary of the option payoff patterns.
  5. What do candlestick charts and points and figure charts represent?
  6. What do SML and CML represent?
  7. Who are the different types of traders in the derivative market?

 

Section – B

  1. Answer any THREE (3×15=45)
  1. Explain Porter’s Model in the light of Industry Analysis.
  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) 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.

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

(8+7)

  1. (a) Differentiate between forwards & futures.
  • What are the various methods of classification of Mutual Funds on the basis of structure of schemes?

(8+7)

  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 Dividend Discount and Constant Growth Model valued?

(8+7)

Section – C

  1. Case study – Compulsory Question.                                                      (20 marks)

CASE STUDY

Tata Steel:

The Tata Group of Companies has business operations (114 companies and subsidiaries) in seven defined sectors – Materials, Engineering, Information Technology and Communications, Energy, Services, Consumer Products and Chemicals. Tata Steel with its acquisition of Corus has secured a place among the top ten steel manufacturers in the world and it is the Tata Group’s flagship Company. Other Group Companies in the different sectors are – Tata Motors, Tata Consultancy Services (TCS), Tata Communications, Tata Power, Indian Hotels, Tata Global Beverages and Tata Chemicals.

As an investor wanting to conduct fundamental analysis what are the qualitative factors and quantitative factors that he has to consider? What are the important ratios he needs to calculate to give him an idea about the progress of the company?

 

 

St. Joseph’s College of Commerce M.Com. 2012 II Sem Securities Analysis And Portfolio Management Question Paper PDF Download

ST.JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMSTER EXAMINATION – APRIL 2012

M.COM – II SEMSTER

SECURITIES ANALYSIS AND PORTFOLIO MANAGEMENT                           

TIME : 3 HOURS                                                                                                  Total Marks- 100

Section-A

  1. Answer any seven                                                                           (7X5=35)

 

  • What do you mean by EMH? Bring out its various forms?
  • The rates of return on stock B is given .Determine the AM and GM

Year                         Return on B (%)

1                                      15

2                                      25

3                                    -10

4                                     20

5                                      15

 

  • What steps would an investor follow to make an investment?
  • Explain the Markowitz model?
  • Write a note on company analysis?
  • Explain in detail the Dow Theory?
  • What is Industry Life Cycle? Also mention any 3 Characteristics that are to be evaluated in Industry analysis?
  • Explain CRA’s?
  • Differentiate SML and CML?
  • Write in detail how Gain or Loss occur for the buyer and the writer in case of call and put option?

Section – B

 

  1. Answer any three    (3X15=45)

 

  •  Explain efficient frontier and optimal portfolio?
  • The returns of two assets under 4 possible states of nature are 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%

 

  1. What is the standard deviation of the return on asset 1 and asset 2?
  2. What is the co-variance between the returns of the assets
  3. What is the co-efficient of correlation between them?
  • What are the different risks inherent in the dealings of mutual funds? Also explain the methods by which you can evaluate the performance of mutual funds?
  • What are charts? How are they interpreted in technical analysis?
  • Define economic forecasting. Explain the important forecasting techniques? (3X15=45)

SECTION- C

  • Compulsory Question                                                                                       (1X20=20) 

                             

  • a) What is a risk? Differentiate unique risk and Market risk?

 

  1. b) The returns on the Equity stock of Auto Electricals Limited and the market portfolio over a 15 year period are given below. Calculate 1) Beta and Alpha for the stock of Auto electrical Limited (2) Characteristic line for the stock of Auto Electricals Limited

Year                       Return on Stock of                               Return on Market Portfolio

Auto electrical Limited

1                                  10                                                        12

2                                  15                                                        14

3                                  18                                                        13

4                                  14                                                        10

5                                  16                                                        9

6                                  16                                                        13

7                                  18                                                        14

8                                  4                                                          7

9                                  -9                                                         1

10                                14                                                        12

11                                15                                                        -11

12                                14                                                        16

13                                6                                                          8                                                          14                         7                                                          7

15                                -8                                                         10

 

 

 

St. Joseph’s College of Commerce M.I.B. 2013 IV Sem Securities Analysis And Portfolio Management Question Paper PDF Download

St. Joseph’s College of Commerce (Autonomous)

End Semester Examination- April 2013

MIB – IV Semester

 SECURITIES ANALYSIS AND PORTFOLIO MANAGEMENT

Duration:  3 Hours                                                                                        Max. Marks: 100

Section -A

  1. Answer ANY SEVEN questions                                                                   (7×5=35)

 

  1. “The RBI’s decision to cut rates will help revive investment in the economy,” Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, said, adding that the economy was beginning to bottom out after a long slowdown. He was referring to the Repo rate and CRR. Explain how?
  2. India has a BBB- rating from S&P, the lowest investment grade among the BRIC group of large emerging economies and one notch above “junk” status. In the light of the above, write a note on credit rating symbols and junk bonds.
  3. There is this joke about a dealer whose trades were based on technical calls. One day his boss asks him which stock he is trading on, and he answers ‘Ford’. “Great company. In fact own a Ford car,” says his boss. “I didn’t know they made cars,” the technical trader replies. Bring out the meaning of the above statement by differentiating between Fundamental analysis and Technical analysis.
  4. HDFC Bank, the country’s second largest private sector bank has suspended around 20 employees pending enquiry into the allegations made by Cobrapost representatives, stating that the bank employees are encouraging money laundering. Explain money laundering with special emphasis on the present case.
  1. Suppose an edible oil importer wants to import edible oil worth USD 100,000 and places his import order on July 15, 2008, with the delivery date being 4 months ahead. At the time when the contract is placed, in the spot market, one USD was worth say INR 44.50. But, suppose the Indian Rupee depreciates to INR 44.75 per USD when the payment is due in October 2008, the value of the payment for the importer goes up to INR 4,475,000 rather than INR 4,450,000. What would be his hedging strategy?

 

  1. You are an Investment consultant with rich experience in equity research and portfolio management. You are requested by a client to give a presentation on equity valuation. You prepare 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 equity share is expected to provide a dividend of INR 2.00 and fetch a price of INR 18.80 a year hence. What price would it sell for now if investors’ required rate of return is 12%?

 

  1. (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?

 

  • 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?

 

  1. Is subscription to 6-year post office monthly income scheme considered as investment? Why?
  1. What are the qualitative factors to be considered for Company Analysis?

 

  1. Explain diagrammatically the concept of role reversal in Technical Analysis.

 

Section -B

  1. Answer any THREE (3×15=45)
  1. (a) What are the different stages of industry cycle and the main features of such stages?

 

  • What is five-force analysis and its utility for industry analysis?

(8+7)

  1. (a) 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.

(b) What are the various methods of classification of Mutual Funds on the basis of investment objective?

(8+7)

  1. (a) Briefly explain the E-I-C framework of Fundamental Analysis.
  • The total risk of a portfolio consist of two parts: Market risk (systematic) and Unique risk (unsystematic). Explain.

(8+7)

  1. The stock of P Ltd performs well relative to other stocks during recessionary periods, while the stock of Q Ltd does well during the growth period. Both the stocks are currently selling for INR 100/share. The rupee return (dividend plus price) of these stocks for the next year would be as follows:
  High growth Low growth Stagnation Recession
Probability 0.3 0.4 0.2 0.1
Return of P Ltd stock 100 110 120 140
Return of Q Ltd stock 150 130 90 60

Calculate the expected return and standard deviation of:

  • INR 1000 in equity stock of P Ltd
  • INR 1000 in equity stock of Q Ltd
  • INR 500 in equity stock of P Ltd and INR 500 in Q Ltd.
  • INR 700 in equity stock of P Ltd and INR 300 in Q Ltd.

Which of the above 4 options would an investor choose and why? (15 marks)

  1.  (a) 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 12
2 -6 1
3 18 14
4 30 24
5 12 16
6 25 30
7 2 -3
8 20 24
9 18 15
10 24 22
11 8 12

Calculate the beta for the stock of Auto Electricals Limited.

(b ) Explain the relationship between coupon rate, required yield and price of a bond.

(10+5)

  1. (a) What do SML and CML represent?
  • Suppose a company has issued 1975 lakh shares of which 900 shares are promoters’ holdings and its closing price on BSE on say May 10, 2009 was INR 350 per share. , The market capitalization on May 9th 2009 was 354420 lakhs. The index value on the same day was 5620 points. How will the index on May 10th be calculated? Explain the method employed to calculate the index.

(8+7)

Section C

  • Case study – Compulsory Question.                                (15+5 marks)
  1. (a) What are the 4 main types of charts used in Technical Analysis? Show them diagrammatically and differentiate between them.

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 behaviour.

 

  • Give a summary of option pay off patterns

 

St. Joseph’s College of Commerce IV Sem Securities Analysis And Portfolio Management Question Paper PDF Download

St. Joseph’s College of Commerce (Autonomous)

End Semester Examination- MARCH / April 2014

MIB – IV Semester

 SECURITIES ANALYSIS AND PORTFOLIO MANAGEMENT

Duration:  3 Hours                                                                                      Max. Marks: 100

Section – A

  1. Answer any SEVEN questions out of TEN. Each carries 5 marks.         (7 x 5  = 35)
  2. Many people advocate mutual funds for small investors. They suggest that the best strategy for small investors is to buy shares in a good mutual fund and put them away. What do you think of this advice.
  3. Assume that a group of securities has the following characteristics : a) the standard deviation of each security is equal to σA and b) covariance of returns σAB is equal for each pair of securities in the group. What is the portfolio variance for a portfolio containing four securities which are equally weighted?
  4. “Investing in levered companies is profitable during the boom period and voiding it during recession is more wise”- Elucidate.
  5. What is listing? Why do companies get their shares listed on the stock exchange?
  6. Explain the assumptions of CAPM.
  7. 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% and 21.43%. The mean return of market index is 12% and its standard deviation is 7. The risk rate is 8%.
  8. Compute the Jensen Index for each fund.
  9. Compute the Treynor and Sharpe indices for the funds. Interpret the results.
  10. The market price of a Rs. 1,000 par value bond carrying a coupon rate of 14 percent and maturing after five years is Rs 1050. What is the yield to maturity (YTM) on this bond? What is the approximate YTM? What will be the realized yield to maturity if the reinvestment rate is 12 percent?
  11. Discuss the forces that drive competition and influence profit potential for industries according to Michael porter.
  12. Explain the nature of a risk-return indifference curve.
  13. Briefly explain the risks involved in construction of portfolio as per Sharpe’s Single Index model.

Section – B

  1. Answer any THREE out of FIVE   Each carries 15 marks.  (3x 15 = 45)

                                                                 

                                                                                                                                     (7+8)

  1. (a) What is the significance of Economic Analysis in making Investment decision.

(b) An investor has a choice of four stocks for investment. Their rates of return and probabilities are given below:

A B C D
r P% r P% r P% r P%
-30 20 -20 15 -20 20 -10 10
0 40 0 35 10 40 0 25
30 30 20 45 40 30 10 40
70 10 40 5 80 10 20 25

 

  1. Are all these stocks attractive investments? Give reasons.
  2. Of those that are attractive, how should the investor choose one to buy?

(8+7)                                                                                                                                                                                                                                                                                                                                                                                      (8+7)

  1. (a) The following details are given for X and Y companies stocks and the Bombay Sensex for a period of one year. Calculate the systematic and unsystematic risk for the companies stocks. If equal amount of money is allocated for the stocks what would be the portfolio risk?
  X stock Y stock Sensex
Average return 0.15 0.25 0.06
Variance of return 6.30 5.86 2.25
β 0.71 0.27  
Correlation co-efficient 0.424    
Co-efficient of determination (r2) 0.18    

 

(b) The returns of two assets under four possible states of nature are 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%
  1. What is the standard deviation of the return on Asset 1 & Asset 2?
  2. What is the covariance between the returns on assets 1 and 2?
  • What is the coefficient of correlation between the returns on assets 1 and 2?

(8+7)

13 (a) The following information is available on a bond:

Face value: Rs.100

Coupon rate: 12 percent payable annually

Years to maturity:6

Current market price: Rs 110

What is the duration of the bond? Use the approximate formula for calculating     the yield to maturity.

(b) Discuss the arbitrage pricing theory.

 

  1. Explain the Black and Scholes model and its underlying assumptions. (15 marks)

 

(7+8)

  1. (a) What do SML and CML represent?

(b) Estimate the stock return by using the CAPM model and arbitrage model. The particulars are given below:

  • The expected return of the market is 15% and the equity’s beta is 1.2. The risk free rate of interest is 8 percent.

 

  • Factor Market price of Risk                        Sensitivity Index

Inflation                                 6%                                           1.1

Industrial Production          2%                                           0.8

Risk premium                      3%                                           1.0

Interest rate                           4%                                           -0.9

What explanations can you offer to explain the difference in two estimates?

 

(7+8)

  1. (a) “The technical analysts studies the behavior of the price of the stock to determine the future price of the stock”. Discuss.

 

(b) Anand is considering the purchase of three securities A, B and C for the next year. The returns of the securities depend on next year’s state of the stock market. The estimated rates of return are shown in the table.

State of market Probability of Occurrence Rates of return of securities
    A B c
Recession 0.25 10% 9% 14%
Average 0.50 14% 13% 12%
Boom 0.25 16% 18% 10%

 

  1. Find each stock’s expected rate of return standard deviation and co-efficient of variation.
  2. Apply mean, variance criterion to the alternative investments.
  • If Anand invest one third on each security what would be his portfolio return?
  1. What are the covariances between security A and B, B and C and A and C?

 

Section – C

  • Compulsory Question                                                                        (1 x 20 = 20)

 

(15+5)

  1. a)The rates of return on Stock A and market portfolio for 15 periods are given below:

 

 

Period

Return on stock A (%) Return of market portfolio (%)  

Period

Return on stock A (%) Return of market portfolio (%)
1 24 7 9 -8 1
2 13 14 10 13 12
3 17 13 11 14 -11
4 15 9 12 -15 16
5 14 10 13 25 8
6 18 13 14 9 7
7 16 14 15 -9 10
8 6 7      

 

  1. What is the beta for stock A?
  2. What is the characteristic line for stock A?

 

(b) Write a note on Portfolio Revision strategies.

 

 

 

St. Joseph’s College of Commerce 2016 Securities Analysis And Portfolio Management Question Paper PDF Download

REG NO:

ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION – MARCH/APRIL 2016
 M.I.B. – IV semester
P211402: SECURITIES ANALYSIS AND PORTFOLIO MANAGEMENT
 

Duration: 3 Hours                                                                                        Max. Marks: 100

SECTION – A
I) Answer any SEVEN questions.  Each carries 5 marks.                             (7×5=35)
  1. Mutual funds provide stability to share prices, safety to investors and resources to prospective entrepreneurs – Discuss the importance of mutual funds.
  2. Determine the market value of equity shares of the company from the following information:

Earnings of the company   Rs.8,00,000

Number of shares outstanding  1,00,000

Dividend paid  Rs.4,00,000

Price earning ratio   10%

Rate of return on investment  15%

  3. At the expansion stage, companies show their competitive position and able to maintain their profits in the market. Hence, this is the best time for investment. – Explain.
  4. What are the functions of credit rating?
  5. Explain the assumptions of Random Walk Theory.
  6. What is Beta?  How is it different from correlation?
  7.

 

 

 

Following are the particulars relating to realized yield to maturity of investment in bond:

Par value : Rs.1,000;  Coupon rate: 10% p.a.;  Maturity : 5 Years;  Current market price : Rs. 600;

Reinvestment rate of future cash flows 12%. Calculate the future value of bond.

  8. “All investors are risk averse- only the degree of aversion varies”.  In this light, bring out the different categories of investors.
  9. Explain the portfolio management process.
  10. Differentiate between Capital asset pricing model and arbitrage pricing theory model.
SECTION – B
II) Answer any THREE questions.  Each carries 15 marks.                     (3×15=45)
  11. a) State the significance of company analysis in case of consumer goods industry.

 

b)An investor has to choose from 2 securities. The following are their rates of return and probabilities

 

 

 

 

P Q
Return(%) Probability Return(%) Probability
13 0.1 20 0.1
16 0.2 16 0.4
22 0.3 10 0.3
25 0.4 3 0.2

State which is the best security for investment?

(8+7 =15)

  12. a)From the following data calculate (i)Beta, (ii)Alpha, (iii)residual value and (iv)correlation.

Year X Y
1 0.10 0.29
2 0.24 0.31
3 0.11 0.10
4 0.08 0.06
5 0.03 0.07

 

b) From the following calculate return and risk through probability distribution and standard deviation and variance of two companies

Possible outcome Return of A Return of A Probability
1 0.04 0.05 0.25
2 0.12 0.09 0.50
3 0.18 0.18 0.25

                                                                                                                    (8+7 =15)

  13. a)An investor has expected a rate of return of 25% from the following shares. Which one should be chosen?

Name of shares Expected dividend Price of share on
1.04.2005 1.05.2006
A 35% 100 130
B 15% 40 110
C 10% 350 450

 

b) Explain the methods of diversification.

                                                                                                                  (8+7 =15)

  14. An investor wants to buy shares in companies under pharma industry. What are the fundamental factors to be considered which affect the growth of the industry before making purchase?

 

  15. a) The earnings of a company is Rs.8 and the rate of capitalization is 10%. The company has before it an option of adopting (i) 50%, ii) 75%  and

(iii) 100% pay out ratio. Compute the market price of the company quoted share as per Walter’s model, if it can earn a return of (i)15%,  (ii)10%

And  (iii) 5% on its retained earnings.

b) What are the assumptions of CAPM.

                                                                                                                  (8+7 =15)

 

 

 

SECTION – C
III) Case Study                                                                                                       (1×20=20)
  16. An investor earns a return of 15% if he invests in equity shares, A mutual fund announces scheme whereby the investor will earn 16%. The expenses of the mutual fund on the new issue are 2%. What in your opinion should be the expenses of the mutual fund for the investor to be indifferent between equity investment and mutual fund investment?

 

 

 

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