Instructions to be followed:

1. Provide your answers as handwritten preferably in black ball pen on A4 paper with margins on both sides.
2. Write your name and roll number on top of the each answer sheet which must be numbered ( 1/6,2/6, ….)
3. Answer your question by providing “answer to question 1” for example. Do not reproduce the question pl.
4. Having finished the exam, scan it and send it by email at dcomexam@gmail.com and Cc to the teacher
concerned (abkhan@bzu.edu.pk)
5. Do not submit your paper in the Whatsapp group.
6. The answer sheet should reach within 15 minutes after the exam time is over.
7. Delay in submission would lead to deduction of marks.
8. If the exam is not submitted within 15 minutes, you will be awarded zero marks.

Final-term Exam: MCOM Morning Semester 3, Session 2019-21 Investment Analysis &
Portfolio Management Maximum Marks 38( 8+12+ 10+8) Maximum time: 95 Minutes

Q#2 Compare and contrast the top-down and bottom –up approaches of security valuation. Why we
analyze the security market and alternative industries prior to analyzing a company security?

Q#3: What do you understand about a risk-free asset, state its major characteristics and explain how it is
used in the Harry Markowitz Portfolio Model, capital market theory and the Capital asset Pricing Model?

Q#4: Monthly returns of three market Indexes are given hereunder:

Index/Month 1 2 3 4 5 6
S&P-500 (%) 2 6 -1.5 2.5 4 -4
AMEX-100(%) 3 7 0-2 2 - 5.5 6
NASDAQ (%) 4 -3 7 3 2 7
Calculate:
i). Arithmetic average monthly return and standard deviation of each of the Indexes.
ii). Covariance between S&P-500 and AMEX-100 as well as between AMEX-100 and NASDAQ
iii). Correlation Coefficient between S&P-500 and AMEX-100 as well as between AMEX-100 and NASDAQ

iv). Calculate the expected return and standard deviation of a portfolio consisting of S&P-500 and AMEX-
100 with 60% proportion of the investment in S&P-500 and remaining investment in AMEX-100

Q#5: How efficient market theory and random walk theory are related? Explain and contrast the Semi-
strong form of efficiency with the strong form of market efficiency in terms of abnormal rate of return.

___________________________Good Luck ___________________________________