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Fall-2013
Master of
Business Administration- MBA Semester 4
MF0010–SECURITY
ANALYSIS AND PORTFOLIO MANAGEMENT-4 Credits
(Book ID:
1754)
Assignment
(60 Marks)
Note: Answers
for 10 marks questions should be approximately of 400 words. Each question is
followed by evaluation scheme. Each Question carries 10 marks 6 X 10=60.
Q1. Financial markets bring the
providers and users in direct contact without any intermediary. Financial
markets permits the businesses and governments to raise the funds needed by
sale of securities. Describe the money market/capital market – features and its
composition.
Answer. Features Money Market:
Securities
Money
markets specialize in short-term--less than one year--debt securities. This
short maturation time provides the same benefits as liquid cash for the
investor. Basically, a money market security is an IOU from a government,
financial institution or other large corporation. Money market securities are
safer than most other securities and therefore offer lower returns.
Q2. Risk is the likelihood that your
investment will either earn money or lose money. Explain the factors that
affect risk.
Mr. Rahul invests in equity shares of
Wipro. Its anticipated returns and associated probabilities are given below:
|
Return
|
-15
|
-10
|
5
|
10
|
15
|
20
|
30
|
|
Probability
|
0.05
|
0.10
|
0.15
|
0.25
|
0.30
|
0.10
|
0.05
|
You are required to calculate the
expected ROR and risk in terms of standard deviation.
Answer. Risks:
Systematic Risk
Systematic
risk is also known as market risk and relates to factors that affect the
overall economy or securities markets. Systematic risk affects all companies,
regardless of the company's financial condition, management, or capital
structure, and, depending on the investment, can involve international as well
as domestic factors.
Q3. Explain the business cycle and
leading coincidental & lagging indicators. Analyse the issues in
fundamental analysis.
Answer. Business Cycle:
Composite of
leading, lagging and coincident indexes created by the Conference Board and
used to forecast changes in the direction of the overall economy of a country.
They can be used to confirm or predict the peaks and troughs of the business
cycle and are published for the U.S., Mexico, France, the U.K., South Korea,
Japan, Germany, Australia and Spain.
Types of Indicators:
1. Leading
Indicators
Leading
indicators consist of measures of economic activity in which shifts may predict
the onset of a business cycle. Examples of leading indicators include average
weekly work hours in manufacturing, factory orders for goods, housing permits
and stock prices. Increases or decreases in these measures
Q4. Discuss the implications of EMH
for security analysis and portfolio management.
Answer. Passive Captures the Return
of an Entire Market
When you
take this analogy, and apply it to investing, first you look at the entire
market of available stocks. A passive investor wants to own all the stocks,
because they think as a whole, over long periods of time, capitalism works, and
they are likely to receive higher returns from investing in the entire stock
market than by trying to pick the individual stocks which will outperform the
market as a whole.
Q5. Explain about the interest rate
risk and the two components in it.
An investor is considering the
purchase of a share of XYZ Ltd. If his required rate of return is 10%, the
year-end expected dividend is Rs. 5 and year-end price is expected to be Rs.
24, Compute the value of the share.
Answer. Interest Rate Risk'
The risk
that an investment's value will change due to a change in the absolute level of
interest rates, in the spread between two rates, in the shape of the yield
curve or in any other interest rate relationship. Such changes usually affect
securities inversely and can be reduced by diversifying (investing in
fixed-income securities with different durations) or hedging (e.g. through an
interest rate swap).
Q6. Elucidate the risk and returns of
foreign investing. Analyse international listing.
Answer. Risks:
Transaction Costs
Likely the
biggest barriers to investing in international markets are the transaction
costs. Although we live in a relatively globalized and connected world,
transactions costs can still vary greatly depending on which foreign market you
are investing in. Brokerage commissions are almost always higher in
international markets compared to domestic rates.
Solved
assignments for Rs.150 each
08627023490
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