DU SOL M.Com Question Paper 2nd Year 2018 Sem 4 Security Analysis and Portfolio Management

fThis question paper contains 6 printed pages.]

4147 your Roil No.

M.COM. : SEMESTER - IV (OC) c
Paper No. - 7102

Security Analysis & Portfolio Management

Time: 3 Hours Maximum Marks : 100

(lVrite your Roll No. on the top immediately
on receipt of this question paper.)

Atternpt a,ll questions.
All questions caruy equal marks.

1. (a) "The Investment process involves a series of activities
starting from policy formulation',. In the light of this
statement, explain investment decision-making process.
Explain relevance of this process in making sound
investment decisions. (10)

(b) Give an account of the reforms introduced by SEBI in
primary and secondary market in India ? (10)

OR

(c) Following information is available in respect of the rate
of return on two securities - A and B :

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Condition Probabilitv Rate of return Rate of return
on A(%) on B (%)
Recession 40% t6 20
Normal 40% 12 13
a
Boom 20% 1
-5

Which of the followine two securities is eood for
investment ?

(i) In terms of return
(ii) In terms of risk (1 0)

(d) Distinguish between systematic and unsystematic
Risk. Cite some recent examples of systematic and
unsystematic risk and how they have affected the Indian
stock market and stocks in specific industry ? (10)

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

(i) Calculate the intrinsic value of the bond. Should
Mr. X buy the bond ?

(ii) Calculate the Yield to Maturity of the bond.
(r2)

3
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and (ii) Junk Bonds (B)
(b) Explain (i) Bond Indenture
OR
seiling
coupon bond is currently
(c) A Rs' 1000 par vaiue 970 4 years to
160/o' The bond has
at yield to maturity of
maturity and interest
is payable annually' Calculate
the bond'
price of the bond and duration of
current (10)

current yield' yield
to maturity and
(d) Distinguish between (10)
the concept involved'
coupon rare' Discuss

rvhich paid a
shares outstanding'
3. (a) X Ltd' has common traditionally
last year' Investors have
dividend of Rs' 1'50 shares'
;;" of return of 20 percent on these
recluired on the
" that earntngs and dividends
Forecasts suggest
next five
will grow at a rate of 15% over the
stock is the
and it u of 10% thereafter' What
years 'ut" stock ? (12)
intrinsic value of the
whereas
is usetul for investors
(b) "Fundamental Analysis
Technical Analysis is
usetul for traders"' Critically
(B)
comment'
OR
at Rs' 150'
are currently trading
(c) The shares of ABC Ltd'
of Rs' 8 last year' The
It deciared dividend per share the rate of 9ok p'a'
grow at
dividend is expected to
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forever. Investor A, B and C have expected rate of
return of 75oh, 18% and 12o/o respectively. Find whether
the current price offers them proper opportunity for
investment in the shares of the company. (12)

(d) What is "Economic-Industry-Company" Framework ?
Explain its significance for an investor. (8)

+. (a) What is the essential difference between the Sharpe
and Treynor Indexes of portfolio performance ? Which
do you think is preferable ? Why ? (10)

(b) An investor is considering investment in securities P
and Q whose details are given below

Particulars Security P Security Q

Expected Return r3% I6%

Std. Dev. of return 4% 7%

If a portfolio with 30o/o of P and 70o/o of Q is formed,
find the

(i) Expected return of the portfolio

(ii) Minimum risk of the portfolio

(iii) Maximum Risk of the portfolio ( 10)

4L47 f,

OR

(c) Consider the following information for three
mutual

funds, A, B, C and the market :

Market index
Sharpe
The mean risk free rate was 6 percent. calculate
measure of
measure, Treynor measure and Jensen
and
performance evaluation for the three mutual funds
(i0)
the area market index'

(d) What is efficient irbntier in the Markowitz Formulation
?

How does the investor select the optimal
portfolio from
(10)
the efficient sets ?

regarding
5. (a) An Investor has obtained the following details
XYZ corPoration call oPtion

Current Price of the stock
: Rs. 140
Exercise Price = Rs. 130

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Time of exPiration : 1 Year

Standarcl Deviation
: 0'50

Risk-free rate of Interest : 60/o p'a'

Using the Black-Scholes model, determine the value of
call option. Q2)

(b) What are future Contracts ? What are their features ?
Whatarethefactorsdeterminingthepriceoffutures
contract ? (8)

OR

(c) Write notes on any tw.o of the following :

(i) Efficient Market I{ypothesis'

(ii) Capital Asset Pricing Model (CAPM)

(iii) Option Strategies ,, (10x2=20)

(1 00)