2010
COMMERCE (Speciality)
Course: 404 (Security Analysis and Portfolio Management)
The figures in the margin indicate full marks for the questions
(NEW COURSE)
Full Marks: 80
Pass Marks: 24
Time: 3 hours
1. (A) the investment process involves
a series of activities starting from policy formulation to portfolio
evaluation.
Or
(b) Mr.x has Rs.50, 000 to make one
time investment. His son has entered the higher secondary school and he needs his
money back after 2(two) years for his son’s educational expenses. As Mr. X’s
outflow is one time and the duration is simply 2(two) years, now he has a
choice of two types of bonds:
(i)
Bond a has a coupon rate of 7% and maturity period of 4(four) years with a
current yield of 10% the current price is Rs 904.90
(ii)Bond
B has the coupon rate of 6% with a maturity period of 1 (one) year and a
current yield of 10% the current price is Rs 963.64.
How can Mr. X solve his problem to avoid
risk? How can he decide as to how much of his investable fund he should invest
in each of the two bonds?
(1)
Calculate the duration.
(2)
Determine the proportion of funds to be invested in Bond A and Bond B.
(3)
Determine the number of bonds A and B which he can buy with Prevailing market
price mentioned above.
2. (A) Discuss various steps involved
in the traditional approach to portfolio construction.
Or
(b) Stock X and Y have yielded the
following returns for the past two years:
|
Year
|
Return (X)
|
Return(Y)
|
|
2007 – 2008
|
12%
|
14%
|
|
2008 – 2009
|
18%
|
12%
|
(i) What is the expected return on portfolio made
up to 60% of X and 40% of Y?
(ii)Find out the standard deviation of
each stock.
(iii) What is the covariance and
coefficient of correlation between X and Y?
(iv) What is the portfolio risk of a
portfolio made up to60% of X and 40% of Y?
3(a) Explain and illustrate the
concept of capital asset pricing Model with the help of a suitable diagram.
Or
(b) (i) Briefly state the advantages of
adopting capital Asset pricing Model in portfolio management.
(ii) Mr. Z is considering an
investment in the stock of ABC co. LTD. To earn a return of 17% in the next year.
the said company’s ‘beta’ is 1.3, riskfree return is 7%and the market return is
15%. Should Mr. Z invest in ABC co.LTd?
4(a) (i) Briefly Explain, with the help
of a suitable diagram, Sharpe’s performance Index.
(ii) Mr.N is having units in a mutual
fund for the past three years. He wants to evaluate its performance by
comparing it to the market.
|
|
Fund
|
Market
|
|
Return
Standard Deviation
Risk Free rate
Beta (B)
|
70.60
41.30
12%
1.12
|
41.40
19.40
12%
-------
|
Find out the index value according to
Sharp’s performance Index.
Or
(b) (i) Briefly Explain, with the help
of a suitable diagram, treynor’s performance Index of portfolio performance.
(ii)Using the data given in Q.No. 4. (a)
(ii) above, find out the index value according to Treynor’s performance Index.
5(a) what is ‘option’? explain
different types of option. Briefly state its usefulness.
Or
(b) what are the basic features of a
‘future’? Distinguish between ‘option’ and ‘future.’