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Ms-44 June 2010 Security Analysis and Portfolio Management

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June, 2010

Ms-44 : Security Analysis and Portfolio Management

1. What do you understand by 'Investment' ? Explain the steps involved in the investment process.

2. (a) Define risk. What are the statistical tools that are used to measure risk of securities return ?

(b) Mr. Vamsi is considering the purchase of a bond currently selling at Rs. 878.50. The bond has four years to maturity, face value of Rs. 1,000 and 8% coupon rate. The next annual interest payment is due after one year from today. The required rate of return is 10%.

(i) Calculate the intrinsic value (present value) of the bond. Should Vamsi buy the bond ?

(ii) Calculate the yield to maturity of the bond.

3. Discuss the various measures that have been adopted in India to protect investors' interest in securities market.

4. What is market efficiency ? Explain the various anomalies in efficient market hypothesis.

5. (a) In the context of Risk Adjusted returns, briefly explain :

(i) Treynor's Ratio

(ii) Sharpe's Ratio

(b) Puja and Devika are the two mutual funds Puja has a mean success of 0.15 and Devika has 0.22. The Devika has double the beta of Puja fund's 1.5. The standard deviations of Puja and Devika funds are 15% and 21.43%. The mean return of market index is 12% and its standard deviation is 7. The risk free rate is 8%.

(i) Compute the Jensen Index for each fund.

(ii) Compute the Treynor and Sharp indices for the funds. Interpret the results.

6. What is portfolio revision ? Why does it arise ? Discuss the various constraints in portfolio revision.

7. Distinguish between any four of the following :

(a) Growth Fund and Balanced Fund

(b) Ex-dividend and Cum-dividend

(c) Commercial Paper and Commercial Bill of Exchange

(d) Self-regulation and Legislative regulation

(e) Buy-back of Shares and Surrender of Shares

(f) Money Market and Capital Market

8. Write short notes on any four of the following :

(a) Investment Vs. Speculation

(b) Bullish market

(c) Capital market line

(d) Technical analysis

(e) Efficient portfolio

(f) Price-earnings approach

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