QUESTION BANKSECURITY ANALYSIS & PORTFOLIO MANAGEMENTThird SemesterMBA Master of Business AdministrationUniversity of MadrasPrepared by: N Rakesh, Chennai Investment

t / Financial system

Define investment. What are its dimensions.

Describe the different objectives of financial investment

What are the characteristics of investment.

Explain briefly the expectations of individual investors

Discuss the problems faced by the Indian investors.

Explain the function of Financial system.

Differentiate between capital and money market securities.

Explain briefly the institutional arrangements for security investment in India.

Discuss the important weaknesses of the Indian capital market.

Discuss the recent developments in Indian Capital Markets. SEBI

Briefly explain the various regulations of SEBI concerning about the capitalmarkets.

What are the steps taken by SEBI in the primary market to protect the investors.

What are the objectives and functions of SEBI. Explain the organization of SEBI

What are the reforms in the secondary market introduced by SEBI. Stock Exchange / Primary Market

Discuss the most important economic functions of a stock exchange. Explain the concept of Stop Order with a suitable example

What is primary market Describe the concept of Average Up/Down in purchasing of equity shares in thesecondary market

How is IPO made through stock exchange on line system.

What is listing.

List out the various types of speculations at Stock exchange.

Explain the recent trends in NSE.

What are the main institutional agencies in the primary capital market.

What are the main features of Money market

Comment upon the role of Bombay Stock exchange in Indian stockmarket Time Value of Money

What is the aggregate present value of Rs.500 received as interest at the end of each of the next 3 years assuming a discount rate of 10%. Valuation of Bonds

What are fixed income securities. Explain their characteristics

What are the various types of debentures.

A bond having a face value of Rs.1000 has a coupon rate of 12.5%. The bond isredeemable on 31 st December 2005. The selling price on 31 st December 2002 isRs.806. Find out the return earned by X who purchases and keeps it upto maturity

Explain the strategies followed by passive bond investors and active bondinvestors.

Calculate the value of a bond having a par value of Rs.1000, coupon rate of 12%and maturity period of 8 years. The required yield is 10%.

What are the various types of corporate bonds.

What is meant by yield to maturity.

What do you mean by Bond immunization.

How are debt ratings useful. What role do they play in the securities market.

A debenture holder is to receive an annual interest of Rs.100 for perpetuity on hisdebentures of Rs.1000. Calculate the value of the debenture if the required rate of returns is (a) 10% (b) 15% and (c) 8%.

Explain the bond price theorem.

A bond has a par value of Rs.100 and carries a 9 percent per annum couponpayment. The yield to maturity is 7 percent and the maturity period is 5 years.Compute the duration and volatility of the bond.

Identify the major factors that serve as ingredients in setting ratings for bonds

A bond is available at a price of 102. The bond has a coupon of 15 percent andmatures in 20 years. The bond is callable in five years at 111 a. What is the yield-to-maturity on this bondb. What is the yield-to-call on the bond.c. Which would you place more importance on if you were to take a decisionon buying the bond. Risk/Return

Define risk. What are the different kinds of risks in corporate investment.

How does the systematic risk affect the individual stock return.

What is standard deviation. What are its important features.

What is Risk free asset.

Distinguish between Systematic risk and Unsystematic risk.

Explain Interest Rate risk and Inflation risk.

What is Total Return over a period. Illustrate with example The return on the equity stock of X Ltd and the market portfolio over a 10 yearperiod are given below: Year 1 2 3 4 5 6 7 8 9 10 X Ltd 15 -6 18 30 12 25 2 20 18 24MarketReturn12 1 14 24 16 30 -3 24 15 22

How will you calculate the Beta of a stock.

How risk is assessed using a probability distribution? Illustrate your answer.

Calculate the expected return and risk for the securities A and B given Years Expected returns (%)A B 1 10 1421293710

Why standard deviation is a better measure of risk

Calculate the expected return and risk for the securities A and B given State of economy Probability Expected returns (%)A B Recession 0.20 -18 -4Boom 0.45 +20 +10Stagnant 0.35 +18 +25 Equity and Earnings

Specify the characteristic features of equity stocks.

Define EPS. Explain how it is used in evaluating equity shares

Calculate the Earning per share from the following dataEBIT = Rs.5,00,000 Rs.10 lakhs debentures of 10% interestRs.5 lakhs preference shares of 12% dividend10,000 equity shares of Rs.10 eachCorporate income tax is 50%.

What are the advantages of P/E ratio.

What are the distinctive advantages of P/E ratio model over the discounting model Dividend Valuation

Explain the Dividend capitalization model share valuation with growth.

Explain dividend valuation model of an equity share under zero growth, constantgrowth and multiple growth Page 4 of 7

Investors in ABC were paid Rs.2.40 as dividend per share last year on their equityand these are expected to grow indefinitely at 8% rate. What is the value of theequity if the investors require an 12% return

Van products currently pays a dividend of Rs.2 per share and their dividend isexpected to grow at a 15% annual rate for 3 years then at a 12% rate for the next 3years. After it is expected to grow at 5% forever. What value would you place onthe equity if the required rate of return were 9%. Fundamental Analysis Define fundamental analysis. Bring out its relevance for equity investment

Economic forecasting is the heart of the economy analysis. Comment andbriefly explain various techniques of economic forecasting

Discuss the key macro economic variables and their impact on stock market.

Explain briefly the basic valuation model of a security

Explain the utility of the economic analysis and state the economic factorsconsidered for this analysis.

How can industries be classified.

Describe the industrial life cycle. What are its implications for the investor.

How Debt and Equity ratio affect EPS? Explain by giving an example

What is meant by fundamental analysis. What are the various factors that areconsidered in such an analysis.

Discuss the market-share/net-income margin approach to company earningsanalysis

What are the obstacles in the way of successful fundamental analysis. Brieflyexplain.

What are the obstacles in the way of an equity analyst.

What are the various factors that are to be considered in Company Analysis Technical Analysis

Discuss the concept of technical analysis What do you understand by Relative Strength Analysis

What is Relative Strength Index. Explain briefly

What is ROC? Technical Analysis is useful to predicting individual share price as well as thedirection of the market as a whole. Elaborate and illustrate.

How does technical analysis differ from the fundamental analysis

Explain the following technical indicators: o New highs and lows o Volume o Short interest ratio o Mutual fund liquidity

Explain the various types of Gaps.

Explain the Elliot wave theory of investing.

What do you understand by Breadth analysis

What are the tools of Technical Analysis Explain the Graham and Dodds investor ratio. Efficient Market Theory

What is an efficient market.

What is random walk theory.

Describe the types of tests that have been commonly employed to verify the weak form of efficient market hypothesis What are the basic assumptions in Capital Asset Pricing Model.

State the formula for Capital Asset Pricing Model (CAPM). Assuming beta of 1.2,risk free return of 4% and the expected market return of 12%, calculate therequired return of an investment under CAPM.

What are the assumptions made under Markowitz theory of portfolio analysis

Describe the procedure developed by Markowitz for choosing the optimalportfolio of risky assets.

What is meant by Active strategies in equity selection techniques? Discuss thevarious approaches of this technique

Explain the important steps in portfolio management.

What are Rosenbergs six indexes of risk in predicting a stocks beta

What are the constraints in portfolio revision? Explain briefly.

Discuss the Capital Asset Pricing Model.

What is meant by portfolio management? Discuss the elements of portfoliomanagement.

What are the basic principles to be applied to all portfolio decisions? Brieflyexplain.

Briefly describe the three basic policies with respect to portfolio rebalancing.

Describe the key vectors of active portfolio strategy.

What are formula plans. How do they help in portfolio revision.

What do you mean by SML

How does the risk profile of an investor affect portfolio selection

Discuss on the unsystematic risks of investments in portfolios.

Explain the basic assumptions of Markowitz efficient frontier theory.

Calculate the expected returns to a portfolio composed of the following securities. Security Expected Returns Proportion A 10% 20%B 15% 20%C 20% 60%

Stocks X and Y display the following returns over the past two years. Years Stock X Stock Return (%) Return (%)2005 10 182006 16 12a) What is the standard deviation of each stock b) What is the covariance of stocks X and Yc) Determine the correlation coefficient of stocks X and Yd) What is the expected return and risk of a portfolio made up of 40 percent Xand 60 percent Y. Measurement of Portfolio Management / Mutual Funds How do you judge a mutual funds performance through Sharpe and Treynorsmethods. Explain the objectives of mutual funds.

What are the differences between open-end and closed-end mutual funds.

What is meant by mutual fund? What are the advantages of professionallymanaged portfolio.

What are the types of Mutual funds.

What are the advantages of investing in mutual funds.

Discuss the role of Unit Trust of India.

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M.B.A. DEGREE EXAMINATION, NOVEMBER/DECEMBER 2010 Elective BA 9257 SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT (Regulation 2009) Time : Three hours Maximum : 100 Marks Answer ALL questions PART A (10 2 = 20 Marks)] What are the three components of an investors required rate of return on an investment? Differentiate an investor from speculator. What is reverse book building? Explain the current settlement system in NSE. What is industry life cycle analysis?

6. What are Graham and Dodds investor ratios? 7. Differentiate fundamental analysis from technical analysis. 8. Explain the importance of Oscillators in technical analysis. 9. Explain CAPM. 10. How are the portfolios evaluated?

PART B (5 16 = 80 Marks) 11. (a) Explain the steps in portfolio / investment management. Or (b) Explain the different types of investment alternatives available for a common investor. 12. (a) Discuss the trading system in stock exchanges. Mention some of the recent reforms in the trading system. Or (b) Discuss the SEBIs Guidelines to the share trading. 13. (a) Explain the salient features you will take into account while doing fundamental analysis. Or (b) Explain some of the key ratios that you will be considering before investing in a stock. Can you depend only on these ratios for making the decision? 14. (a) What are the important points that you will be taking into account while doing Technical analysis? Is Technical analysis a substitute for fundamental analysis? Discuss. Or (b) Explain efficient market theory. 15. (a) Explain the various facets of CAPM in detail. Or (b) From the given data, evaluate the portfolios using Sharpe, Treynor and Jensens model. Portfolio A Portfolio B Portfolio C Return 20% 25% 18% Beta 1.5 1.6 1.4 Std. Deviation 5% 6% 4% Market return 12% Risk free rate 7%