Download GTU (Gujarat Technological University) MBA (Master of Business Administration) 2018 Winter 3rs Sem 2830203 Security Analysis And Portfolio Management Previous Question Paper

Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA ? SEMESTER 3 ? EXAMINATION ? WINTER 2018

Subject Code: 2830203 Date:11/12/2018

Subject Name: Security Analysis and Portfolio Management

Time: 10:30 AM To 01:30 PM Total Marks: 70

Instructions:

1. Attempt all questions.

2. Make suitable assumptions wherever necessary.

3. Figures to the right indicate full marks.

Q.1 (a) 6

The net wealth of the aggregate economy is equal to the sum of

1. A. All real assets. B. All financial assets

C. All physical assets. D. All real and financial assets.

2. In words, the real rate of interest is approximately equal to

A. The nominal rate times the

inflation rate

B. The inflation rate minus the nominal rate

C. The nominal rate minus

the inflation rate.

D The inflation rate divided by the nominal rate.

3. This type of risk is avoidable through proper diversification.

A. Portfolio Risk B. Systematic Risk

C. Unsystematic Risk D. Total Risk

4. Portfolio theory as described by Markowitz is most concerned with

A. The elimination of

systematic risk.

B. The identification of unsystematic risk

C. The effect of

diversification on portfolio

risk.

D. Active portfolio management to enhance

returns.

5. The risk-free security has a beta equal to , while the market portfolio's

beta is equal to .

A.

One; More than one.

B. One; less than one.

C. Zero; one. D. Less than zero; more than zero.

6. Assume that a security is fairly priced and has an expected rate of return of 0.13.

The market expected rate of return is 0.13 and the risk-free rate is 0.04. The beta of

the stock is

A. 1.25 B. 1.7

C. 1.0 D. 0.95

Q.1 (b) Define the following

(a) Convexity

(b) Effective Interest Rate

(c ) Alpha

(D) Limit Order

04

Q.1 (c) Differentiate Investment from Speculation. 04

Q.2 (a) What do you understand by efficient market hypothesis? Also explain various forms of

market efficiency in detail.

07

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Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA ? SEMESTER 3 ? EXAMINATION ? WINTER 2018

Subject Code: 2830203 Date:11/12/2018

Subject Name: Security Analysis and Portfolio Management

Time: 10:30 AM To 01:30 PM Total Marks: 70

Instructions:

1. Attempt all questions.

2. Make suitable assumptions wherever necessary.

3. Figures to the right indicate full marks.

Q.1 (a) 6

The net wealth of the aggregate economy is equal to the sum of

1. A. All real assets. B. All financial assets

C. All physical assets. D. All real and financial assets.

2. In words, the real rate of interest is approximately equal to

A. The nominal rate times the

inflation rate

B. The inflation rate minus the nominal rate

C. The nominal rate minus

the inflation rate.

D The inflation rate divided by the nominal rate.

3. This type of risk is avoidable through proper diversification.

A. Portfolio Risk B. Systematic Risk

C. Unsystematic Risk D. Total Risk

4. Portfolio theory as described by Markowitz is most concerned with

A. The elimination of

systematic risk.

B. The identification of unsystematic risk

C. The effect of

diversification on portfolio

risk.

D. Active portfolio management to enhance

returns.

5. The risk-free security has a beta equal to , while the market portfolio's

beta is equal to .

A.

One; More than one.

B. One; less than one.

C. Zero; one. D. Less than zero; more than zero.

6. Assume that a security is fairly priced and has an expected rate of return of 0.13.

The market expected rate of return is 0.13 and the risk-free rate is 0.04. The beta of

the stock is

A. 1.25 B. 1.7

C. 1.0 D. 0.95

Q.1 (b) Define the following

(a) Convexity

(b) Effective Interest Rate

(c ) Alpha

(D) Limit Order

04

Q.1 (c) Differentiate Investment from Speculation. 04

Q.2 (a) What do you understand by efficient market hypothesis? Also explain various forms of

market efficiency in detail.

07

2

(b) Mr. X is considering an investment in one of the two securities. Given the

information below, advice him to select the investment option based on standard

Deviation and Expected Return.

Security A Security B

Probability Return Probability Return

0.30

0.40

0.30

19%

15%

11%

0.20

0.30

0.30

0.20

22%

06%

14%

- 5%

07

OR

(b) During the past five years, the return of a security were as under

Year 1 2 3 4 5

Return 10% 7% 4% -9% 10%

Calculate (a) Cumulative Wealth Index (b) Arithmetic Mean (c) Geometric Mean

(d) Variance (5) Standard Deviation

07

Q.3 (a) Explain in detail Arbitrage Pricing Theory 07

(b)

The returns of 4 stocks, A, B, C, and D over a period of 5 years have been as follows:

1 2 3 4 5

A 8% 10% -6% -1% 9 %

B 10% 6% -9% 4 % 11%

C 9% 6% 3% 5% 8%

D 10% 8% 13% 7% 12%

Calculate the return on:

a. portfolio of one stock at a time

b. portfolios of two stocks at a time

c. portfolios of three stocks at a time.

d. a portfolio of all the four stocks.

Assume equiproportional investment.

07

OR

Q.3 (a)

Write a detail note on Financial Statement Analysis and its techniques.

07

(b)

A portfolio consists of 4 securities, 1, 2, 3, and 4. The proportions of these securities are:

w 1=0.3, w 2=0.2, w 3=0.2, and w 4=0.3. The standard deviations of returns on these securities

(in percentage terms) are: ? 1=5, ? 2=6, ? 3=12, and ? 4=8. The correlation coefficients among

security returns are: ? 12=0.2, ? 13=0.6, ? 14=0.3, ? 23=0.4, ? 24=0.6, and ? 34=0.5. What is the

standard deviation of portfolio return?

07

Q.4 (a) Discuss the heuristic-driven biases and cognitive errors in Behavioral Finance. 07

(b)

The rate of return on the stock of Sigma Technologies and on the market portfolio for 6

periods has been as follows:

Period Return on the stock Return on the

of Sigma Technologies (%) market portfolio (%)

1 16 14

2 12 10

3 -9 6

4 32 18

5 15 12

6 18 15

(i) What is the beta of the stock of Sigma Technologies.?

(ii) Establish the characteristic line for the stock of Sigma Technologies

07

OR

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Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA ? SEMESTER 3 ? EXAMINATION ? WINTER 2018

Subject Code: 2830203 Date:11/12/2018

Subject Name: Security Analysis and Portfolio Management

Time: 10:30 AM To 01:30 PM Total Marks: 70

Instructions:

1. Attempt all questions.

2. Make suitable assumptions wherever necessary.

3. Figures to the right indicate full marks.

Q.1 (a) 6

The net wealth of the aggregate economy is equal to the sum of

1. A. All real assets. B. All financial assets

C. All physical assets. D. All real and financial assets.

2. In words, the real rate of interest is approximately equal to

A. The nominal rate times the

inflation rate

B. The inflation rate minus the nominal rate

C. The nominal rate minus

the inflation rate.

D The inflation rate divided by the nominal rate.

3. This type of risk is avoidable through proper diversification.

A. Portfolio Risk B. Systematic Risk

C. Unsystematic Risk D. Total Risk

4. Portfolio theory as described by Markowitz is most concerned with

A. The elimination of

systematic risk.

B. The identification of unsystematic risk

C. The effect of

diversification on portfolio

risk.

D. Active portfolio management to enhance

returns.

5. The risk-free security has a beta equal to , while the market portfolio's

beta is equal to .

A.

One; More than one.

B. One; less than one.

C. Zero; one. D. Less than zero; more than zero.

6. Assume that a security is fairly priced and has an expected rate of return of 0.13.

The market expected rate of return is 0.13 and the risk-free rate is 0.04. The beta of

the stock is

A. 1.25 B. 1.7

C. 1.0 D. 0.95

Q.1 (b) Define the following

(a) Convexity

(b) Effective Interest Rate

(c ) Alpha

(D) Limit Order

04

Q.1 (c) Differentiate Investment from Speculation. 04

Q.2 (a) What do you understand by efficient market hypothesis? Also explain various forms of

market efficiency in detail.

07

2

(b) Mr. X is considering an investment in one of the two securities. Given the

information below, advice him to select the investment option based on standard

Deviation and Expected Return.

Security A Security B

Probability Return Probability Return

0.30

0.40

0.30

19%

15%

11%

0.20

0.30

0.30

0.20

22%

06%

14%

- 5%

07

OR

(b) During the past five years, the return of a security were as under

Year 1 2 3 4 5

Return 10% 7% 4% -9% 10%

Calculate (a) Cumulative Wealth Index (b) Arithmetic Mean (c) Geometric Mean

(d) Variance (5) Standard Deviation

07

Q.3 (a) Explain in detail Arbitrage Pricing Theory 07

(b)

The returns of 4 stocks, A, B, C, and D over a period of 5 years have been as follows:

1 2 3 4 5

A 8% 10% -6% -1% 9 %

B 10% 6% -9% 4 % 11%

C 9% 6% 3% 5% 8%

D 10% 8% 13% 7% 12%

Calculate the return on:

a. portfolio of one stock at a time

b. portfolios of two stocks at a time

c. portfolios of three stocks at a time.

d. a portfolio of all the four stocks.

Assume equiproportional investment.

07

OR

Q.3 (a)

Write a detail note on Financial Statement Analysis and its techniques.

07

(b)

A portfolio consists of 4 securities, 1, 2, 3, and 4. The proportions of these securities are:

w 1=0.3, w 2=0.2, w 3=0.2, and w 4=0.3. The standard deviations of returns on these securities

(in percentage terms) are: ? 1=5, ? 2=6, ? 3=12, and ? 4=8. The correlation coefficients among

security returns are: ? 12=0.2, ? 13=0.6, ? 14=0.3, ? 23=0.4, ? 24=0.6, and ? 34=0.5. What is the

standard deviation of portfolio return?

07

Q.4 (a) Discuss the heuristic-driven biases and cognitive errors in Behavioral Finance. 07

(b)

The rate of return on the stock of Sigma Technologies and on the market portfolio for 6

periods has been as follows:

Period Return on the stock Return on the

of Sigma Technologies (%) market portfolio (%)

1 16 14

2 12 10

3 -9 6

4 32 18

5 15 12

6 18 15

(i) What is the beta of the stock of Sigma Technologies.?

(ii) Establish the characteristic line for the stock of Sigma Technologies

07

OR

3

Q.4 (a) Explain in detail the Dow theory and how is it used to determine the direction of

stock market?

07

(b)

The following information is given:

Expected return for the market = 15%

Standard deviation of the market return = 25%

Risk-free rate = 8%

Correlation coefficient between stock A and the market = 0.8

Correlation coefficient between stock B and the market = 0.6

Standard deviation for stock A = 30%

Standard deviation for stock B = 24%

(i) What is the beta for stock A?

(ii) What is the expected return for stock A?

07

Q.5

Consider the following information for three mutual funds, L, M, and N, and

the market.

Mean return (%) Standard deviation (%) Beta

L 15 20 1.6

M 12 11 0.8

N 18 15 1.3

Market index 13 14 1.00

The mean risk-free rate was 8 percent. Calculate the Treynor measure, Sharpe

measure, Jensen measure and M

2

for the three mutual funds and the market index.

14

OR

Q.5

Consider the following information for three mutual funds, X, Y, and Z, and

the market.

Mean return (%) Standard deviation (%) Beta

X 24 22 1.8

Y 16 14 1.2

Z 12 13 0.8

Market index 10 10 1.00

The mean risk-free rate was 7 percent. Calculate the Treynor measure, Sharpe

measure, Jensen measure and M

2

for the three mutual funds and the market index.

14

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This post was last modified on 19 February 2020