Seat No.: Enrolment No.
GUJARAT TECHNOLOGICAL UNIVERSITY
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MBA - SEMESTER 3- EXAMINATION - WINTER 2015
Subject Code: 2830203 Date: 07/12/2015
Subject Name: Security Analysis & Portfolio Management
Time: 10.30 am to 01.30 pm Total Marks: 70
Instructions:
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- Attempt all questions.
- Make suitable assumptions wherever necessary.
- Figures to the right indicate full marks.
Q.1(a) Objective Questions 6
- Book building is used to help in better
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A. Price discovery B. Retail participation
C. Institutional D. Investor communication
participation - Diversification eliminates risk if returns are:
A. Not perfectly B. Perfectly positively correlated--- Content provided by FirstRanker.com ---
positively correlated
C. Perfectly negatively D All the above
correlated - Underpriced securities plot
A. Above the Security B. Below the Security Market Line--- Content provided by FirstRanker.com ---
Market Line
C. Any of the above D. None of the above - According to Weak -form efficiency, market prices impound available
A Private information B. Past information
C. Public information D. Future information - An efficient portfolio is one in which there is no alternative with
A. Lower expected B. The same expected return at a higher risk
return at lower risk
C. Higher expected D. The same expected return at a lower risk
return at higher risk - Internal rate of return on a bond investment is its
A. Current yield B. Yield to maturity
C. Holding period return D. Realised yield
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Q.1 (b) Write notes on:
- Beta
- Marginal Trading
- Holding Period Return
- Sharpe Ratio
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Q.1 (c) What do you mean by Trade-off between Expected Return and Risk?
Q.2 (a) Discuss portfolio management process and factors affecting portfolio performance?
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04
04
07
State of the Economy | Probability of Rate of return
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OccurrenceBoom 0.20 .30
Normal 0.50 18
Recession 0.30 .09
What is the expected return and standard deviation?
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OR
(b) The return on two assets under four possible states of nature are given below.
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State of nature Probability Return on Return on
asset 1 asset 2
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1 0.40 -6% 12%2 0.10 18% 14%
3 0.20 20% 16%
4 0.30 25% 20%
a. What is the standard deviation of the return on asset 1 and asset
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2?b. What is the covariance between the returns on assets 1 & 2?
c. What is the coefficient of correlation between the returns on
assets 1 and 2?
Q.3 (a) What is the purpose of financial statement analysis (FSA) and what are the major techniques of FSA?
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07
(b) What is the meaning of Capital Asset Pricing Model and also state its Major Assumptions.
07
OR
What are the key domestic economic variables to be considered for economic analysis?
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07
(b) The risk-free return is 8 percent and the return on market portfolio is 16 percent. Stock X's beta is 1.2; its dividends and earnings are expected to grow at the constant rate of 10 percent. If the previous dividend per share of stock X was Rs.3.00, what should be the intrinsic value per share of stock: X?
07
Q3 (@
Q.4 (a) Define mutual fund. State how does the mutual fund industry play a role in financial market? Also explain the advantages of investing in mutual funds?
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(b) Explain different indicators associated with Technical Analysis?
07
OR
Q4 (a) Explain Dow Theory and trends associated with the theory in details.
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(b) What are the Top-down versus bottom-up approaches of portfolio management?
07
Q.5
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and the Mean return, standard deviation, Beta of the schemes and the return on the market are provided to you. The mean risk-free rate was 8 percent.
| Mean return (%) | Standard Deviation (%) | Beta | |
|---|---|---|---|
| L | 15 | 20 | 1.6 |
| M | 12 | 11 | 0.8 |
| N | 18 | 15 | 1.3 |
| Market Index | 13 | 14 | 1.0 |
You are required to calculate the Sharpe measure, Treynor measure and Jensen measure. Rate the schemes based on Sharpe, Treynor and Jensen.
OR
Two securities P and Q are considered for investment. Their correlation coefficient of returns is —0.84. The following proportions in the portfolio: (a) 0: 100, (b) 10: 90, (c) 20: 80, (d) 50: 50, and (e) 80: 20 are given to you. The Historical Risk- Return of the two security is
| Security | Standard Deviation (%) | Return (%) |
|---|---|---|
| P | 20 | 15 |
| Q | 30 | 20 |
Compute the risk and return of the portfolio.
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