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Posted Date: 01 Apr 2008 Posted By:: Atul Member Level: Gold Points: 5 (Rs. 1)
2005 General Advanced Diploma in Business Administration SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT Question paper
NARSEE MONJEE INSTITUTE OF MANAGEMENT STUDIES (Deemed University)
DISTANCE LEARNING PROGRAMMES IN MANAGEMENT
MAY 2005 EXAMINATION
SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT
DATE: MAY 28, 2005
TIME : 10 a.m. to 1 p.m. Marks: 100
I. Answer ANY FOUR questions.
II. All questions carry equal marks.
III. Total number of questions are SEVEN.
Q.1. a) State and explain the objectives of Portfolio Management.
b) Does diversification reduce risk? Why and why not? Explain.
c) Following data are available about stock x and y.
Stock x Stock y
Expected Return 20 30
Expected standard deviation 4 5
Co variance of returns (x, y) 20
Is there any advantage of holding and combining x and y
Q.2. In the following only ONE among the multiple answers is correct. Choose the right one and state the Sr. No. of right answer.
(I) Diversification reduces
a) Interest Risk
b) Market Risk
c) Unique Risk
d) Inflation Risk
(II) Risk lovers utility curves have
a) Positive Slope
b) Negative Slope
c) Convex to origin
d) Negative Slope and Convex to the origin
(III) Risk in the Purchase of Infosys and Satyam shares will be eliminated when
a) r = +0.2
b) r = -1
c) r = 0
d) r = +1
(IV) Mr. Karthik purchased RBI Bonds since
a) The returns are certain
b) Minimum variation in the returns
c) The return is certain and the variation is NIL
d) There is assurance of full payment of Principal
(V) The Economy is passing through a phase of uncertainty. The market may either experience a Bull phase or a Bear phase. If investor invests Rs. 1 lac in the stock at present he may either gain one more lac rupees or end up in dead loss. If Mr. Arun invests.
a) He wants to maximise the return
b) He is neutral towards the risk
c) He is a risk lover
d) He loves gambling
(VI) The market value of a scrip is determined by
a) The dividend declared by the company
b) The present status of the stock market
c) The number of floating shares
d) The interaction between Demand and Supply
(VII) The rights of equity holders is listed below. One of them is incorrect.
a) Right to have first claim in the case of winding up of the company
b) Right to vote at the general body meeting of the company
c) Right of the share in the profit of the company in the form of dividend
d) Right to receive a copy of the statutory report
(VIII) The riskiest of the investment will be in the following
a) Gold and Bullion
d) Public deposit of the company
(IX) The following trend is favourable for share price.
a) A rise in book value of share
b) A reduction in Inventory turnover ratio
c) A growth in market share in the Product market
d) An announcement by Government of higher industrial production
(X) MARKOWITZ approach has roots in
a) Good Portfolio Management
b) Proper entry and exit in the market
c) Estimation of stock returns
d) Analysing the risk and return related to stocks
Q.3. a) Explain how the following are important in fundamental analysis
i) Inflation rate ii) Interest rate iii) Foreign Exchange rate
b) Write note on the following
i) Bond Risk ii) Gordon’s Share Valuation Model
iii) Sharpe’s Index for Portfolio Evaluation
Q.4. a) A bond whose face value is Rs.6,000/- was purchased at a price of Rs.4900. The couple rate of the bond is 15% p.a. what is the rate of return on this bond investment?
b) A lender offers 15% nominal rate of interest with quarterly compounding. What is the effective rate of interest?
c) Mr. Ramesh desires to deposit Rs.12000/- annually in his PPF account for 15 years. What will be the accumulated amount in his PPF account at the end of 15 years if interest rate is 9% per annum?
d) Mr. Prashanth buys a scooter with a bank loan of Rs.20,000/-. The bank charges an interest rate of 12% per annum and demand the entire repayment to be over in one year. What will be Equal Monthly Installment?
Q.5.Explain each of the following Avenues of investment briefly.
ii) Preference Share
iii) Gilt Edged security
iv) Ordinary share
v) Commercial paper
Q.6. Attempt any three of the following
a) What are the characteristics of a good investment
b) What is constant rupee plan pursued by the passive portfolio managers
c) What is Random Walk Theory? Explain.
d) Sharpe’s Single Index is superior to Markowitz model of security analysis and portfolio management. Why?
e) What are the uses of price / EPS ratio?
Q.7. Write note on any three of the following
a) Bond duration
b) Efficient Market Hypothesis
c) DOW Theory
d) Use of Moving Average of stock prices
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