ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD (Department of Business Administration)

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INVESTMENT AND SECURITIES MANAGEMENT (MBA-5540)

CHECK LIST

SEMESTER: AUTUMN 2011

This packet comprises following material:1. 2. 3. 4. Text Book Course Outline Assignment No.1, 2. Assignment Forms (two sets)

In this packet, if you find anything missing out of the above mentioned material, please contact at the address given below: The Mailing Officer Services Block No. 28 Allama Iqbal Open University H-8, Islamabad. Phone: 051-9057611-12

Nadia Rashid Course Coordinator

ALLAMA IQBAL OPEN UNIVERSITY ISLAMABAD

(Department of Business Administration)

WARNING
1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE. SUBMITTING ASSIGNMENTS BORROWED OR STOLEN FROM OTHER(S) AS ONES OWN WILL BE PENALIZED AS DEFINED IN AIOU PLAGIARISM POLICY. Semester: Autumn 2011 Total Marks: 100 Pass Marks: 40

2.

Course: Investment and Securities Management (5540) Level: MBA

ASSIGNMENT No. 1
Note: All questions are compulsory. Q. 1 Discuss in detail the investment decision process of a multi-national firm and the external factors that could affect it. (20) Q. 2 What do you mean by indirect investing? Critically examine the future prospects of indirect investing in Pakistan. (20) Q. 3 (a) (b) Describe any six components that make-up a bonds yield. (06) Armaan Corporation has just issued a Rs.1,000 par value zero coupon bond with an 8 percent yield to maturity, due to mature 15 years from today (assume semi-annual compounding). iiiWhat is the market price of a bond? If interest rates remain constant, what will be the price of the bond in three years? iii- If interest rates rise to 10 percent, what will be the price of the bond in three years? (14) Q. 4 (a) (b) Explain the features of various determinants of required rate of return. (05) During the past 5 years, Ahmad owned two stocks that had the following annual rates of return: Year 1 2 3 4 5 Stock T 0.19 0.08 -0.12 -0.03 0.15 Stock B 0.08 0.03 -0.09 0.02 0.04

Required: i- Compute the Arithmetic mean annual rate of return for each stock. Which stock is most desirable by this measure? ii- Compute the Geometric mean rate of return for each stock. iii- Discuss the difference between Arithmetic mean return and the Geometric mean return for each stock you calculated in part (i) & (ii). (15) Q. 5 Describe the following terms with examples: (i) Business Risk (ii) Treasury Bills (iii) Short Sales (iv) Active Management strategies of a bond

(20)

GUIDELINES FOR ASSIGNMENT No. 1 You should look upon the assignments as a test of knowledge, management skills, and communication skills. When you write an assignment answer, you are indicating your knowledge to the teacher:  Your level of understanding of the subject;  How clearly you think;  How well you can reflect on your knowledge & experience;  How well you can use your knowledge in solving problems, explaining situations, and describing organizations and management;  How professional you are, and how much care and attention you give to what you do. To answer a question effectively, address the question directly, bring important related issues into the discussion, refer to sources, and indicate how principles from the course materials apply. You must also be able to identify important problems and implications arising from the answer. The references should be given at the end of the assignment. For citing references, writing bibliographies, and formatting the assignment, APA format should be followed.

ASSIGNMENT No. 2
Total Marks: 100 This assignment is a research activity. You are required to visit any business/ commercial organization and prepare a research report of about 15 to 20 pages on one of the topics given below. To avoid the duplication, you are required to select the topic according to the last digit of your role number. For example if your roll number is I-342718 then you will select topic # 8 from the given below list (last digit):

As there are five topics, you will select the topic according to the last digit mentioned as under: Topic Last digit of the role number 1 1,3 2 2,4 3 5,7 4 6,8 5 0,9 TOPICS: 1. Select an industrial firm and critically examine various types of debt instruments used by them. Also give some recommendations. 2. Discuss in detail the various capital and money market instruments available in the financial markets of Pakistan. Also make a comparison between both two. 3. As a bond investor, while investing in corporate bonds, which bonds strategy(ies) would you like to prefer in case of high fluctuations in the rate of interest in Pakistan. 4. Technical Analysis and its importance for investors 5. Discuss in detail the portfolio management process of any financial institution in Pakistan.

GUIDELINES FOR THE PREPARATION OF ASSIGNMENT # 2 The report should follow the following format:
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Title page Acknowledgements An abstract (one page summary of the paper) Table of contents Introduction to the issue (brief history & significance of issue assigned) Data collection methods Conclusion (one page brief covering important aspects of your report) Recommendations (specific recommendations relevant to issue assigned) References (as per APA format) Annexes (if any)

Other Guidelines:  1.5 line spacing  Use headers and subheads throughout all sections  Organization of ideas  Writing skills (spelling, grammar, punctuation)  Professionalism (readability and general appearance)  Do more than repeat the text  Express a point of view and defend it. You should use transparencies and any other material for effective presentation. The transparencies are not the presentation, but only a tool; the presentation is the combination of the transparencies and your speech. Workshop presentation transparencies should only be in typed format.

You are required to prepare two copies of 2nd assignment. Submit one copy to your tutor/ teacher for evaluation and the second copy for presentations in the workshop in the presence of the resource person and classmates, which will be held at the end of the semester prior to the final examination. GUIDELINES FOR WORKSHOP PRESENTATION:  Make eye contact and react to the audience. Don't read from the transparencies or from report, and don't look too much at the transparencies (occasional glances are acceptable to help in recalling the topic to cover).  A 15-minute presentation can be practiced several times in advance, so do that until you are confident enough. Some people also use a mirror when rehearsing as a substitute for an audience. WEIGHTAGE OF THEORY & PRACTICAL ASPECTS IN ASSIGNMENT # 2 & WORKSHOP PRESENTATIONS: Assignment # 2 & workshop presentations are evaluated on the basis of theory & its applicability. The weightage of each aspect would be: Theory 60% Applicability (practical study of the organization) 40%

INVESTMENT AND SECURITIES MANAGEMENT

(COURSE OUTLINE5540)
UNIT 1 BACKGROUND Background for Understanding Investment The Nature of Investment Understanding the Investment Process External Factors Affecting the Decision Process Types of Securities Organizing Financial Assets Non-Marketable Financial Assets Money Market Securities Capital Market Securities Other Types of Securities INVESTMENT ALTERNATIVES Investment Companies Investing Indirectly through Investment Companies What is an Investment Company Types of Investment Companies Major Types of Mutual Funds Investing Indirectly Investment Company Performance The Future Prospects of Indirect Investing in Pakistan. Securities Markets The Importance of Financial Markets The Primary Markets Secondary Markets

UNIT 2

 Bond Markets The Changing Securities Markets Globalization of Securities Market UNIT 3 TRADING OF SECURITIES AND RISK CONCEPTS How Securities are Traded Brokerage Transactions How Orders Work Investor Protection in the Securities Markets Short Sales Return and Risk Concepts Return Measuring Returns and Risk Estimating Returns and Risk The Return-Risk Relationship FIXED INCOME SECURITIES: ANALYSIS, VALUATION AND MANAGEMET The Basics of Bonds Understanding Bonds The Bond Market Bond Returns and Risks Bond Prices and Yields Bond Prices Bond Price Changes Bond Yields The Level of Market Interest Rates Bond: Analysis and Strategy Why Buy Bonds Important Consideration in Managing a Bond Portfolio The Risk Structure of Interest Rates-Yield Spreads Bond Strategies and Management COMMON STOCK: ANALYSIS, VALUATION AND MANAGEMENT Common Stocks Understanding Common Stocks The Stock Market Buying and Selling Stocks Common Stock Returns Common Stock Risks Historical Returns and Risk for Common Stock Why Investors Buy Stocks Common Stock Valuation The Present Value Approach The P/E Ratio Approach Which Approach to Use Other Valuation Techniques

UNIT 4

UNIT 5

Common Stock: Analysis and Strategy Analyzing Common Stock Asset Allocation The Passive Strategy The Active Strategy Approaches for Analyzing and Selecting Stocks Framework for Fundamental Analysis UNIT 6 DERIVATIVE SECURITIES Options Introduction Understanding Options Payoffs and Profits from Basic Option Position Some Basic Option Strategies Option Valuation An Investors Perspective on Puts and Calls Stock Index Options and Interest Rate Options Futures Understanding Futures Market The Structure of Future Markets The Mechanics of Trading Using Future Contracts Financial Futures ADDITIONAL INVESTMENT OPPURTUNITIES & EFFICIENT MARKET Warrants and Convertible Securities Warrants Valuing Warrants Speculative Value of a Warrant Convertible Securities Convertible Bonds Risk and Return on Convertibles Should Investors Buy Convertible Bonds? Convertible Preferred Stock Analyzing Convertible Preferred Market Efficiency Concept of Efficient Market Why the Market can be Expected to be Efficient? Evidence on Market Efficiency Implication of Efficient Market Hypothesis Evidence of Market Anomalies SECURITY ANALYSIS Market Analysis What is the Market? Understanding the Stock Market Valuing the Market Forecasting Changes in the Market/Economy

UNIT 7

UNIT 8

Industry Analysis Performance of Industries Over Time What is an Industry? Analyzing Industries Company Analysis Fundamental Analysis Understanding Earnings Determinant of Earning Which Earnings are Important? Analyzing and Forecasting Earning Growth Fundamental Security Analysis in Practice The P/E Ratio Syntax's P/E Ratio Additional Company Analysis Technical Analysis What is Technical Analysis? Aggregate Market Analysis Individual Stock Analysis Testing Technical Analysis Strategies Conclusions about Technical Analysis UNIT 9 INVESTMENT MANAGEMENT Portfolio Management Portfolio Management as a Process Formulate an Appropriate Investment Policy Determine and Quantify Capital Market Expectations Constructing the Portfolio Monitor Market Conditions and Investor Circumstances Portfolio Adjustments Performance Measurement Portfolio Selection Use the Markowitz Portfolio Selection Model Consider Borrowing and Lending Possibilities Choose the Final Portfolio Based on Preferences Implication of Portfolio Selection Capital Market The Assumption of CAPM The Market Portfolio Equilibrium Risk-Return Trade Off Estimating the SML Arbitrage Pricing Theory

Recommended Books: 1. Investment Analysis and Management by Charles P. Jones (9th edition). 2. Security Analysis and Portfolio Management by Donald E. Fischer, Ronald J. Jordan (6th edition).

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