Master of Business Administration - Semester III MF0010 Security Analysis & Portfolio Management- 4 Credits Assignment Set- 1 (60

Marks)

Note: Each Question carries 10 marks. Answer all the questions. Q1. Explain the modes of investment
Modes of Investment There are different types of securities conferring different sets of rights on the investors and different conditions under which these rights can be exercised. The various avenues for investment ranging from riskless to high risk investment opportunities consist of both security and non-security form of investment. As an investor you have a wide variety of investment alternatives available to choose

Marketable / Security form of investments: The term Security is generally used for those documents evidencing liabilities of the issuer. When you buy a financial instrument say fixed deposit from a bank, you are issued a document called Fixed Deposit Receipt or Certificate. This receipt is a liability to the bank as the bank has to safe guard the investment; provide interest for using the funds and to return back the invested amount on maturity. This document also outlines the rights of the investor and sets conditions under which the investor can exercise his or her rights. Security forms of investment are those instruments which are transferable and traded in any organized financial market. Equity Shares: Equity shares represent ownership capital. An equity shareholder enjoys both ownership stake and residual interest in income & wealth. The issue of equity shares could be in the form of initial public offer, rights issue, bonus issue, preferential allotment and private placement. Investors has a choice to select equity shares which are broadly differentiated as blue chip shares, growth shares, income shares, cyclical shares and speculative

Bonds/Debentures: Bonds represent long-term debt instruments. The issuer of a bond promises to pay a stipulated payment (interest and principal) to the bond holder. Bond indenture is a contract between the issuer and the bond holder, which specifies the detail of the issue such as par value of the bond, its coupon rate, maturity period, maturity date, call/put options etc. Internationally, a secured corporate debt instrument is called a corporate bond while an unsecured corporate debt instrument is called a corporate debenture. In India, corporate debt instrument is referred as debentures although they are secured. Government bonds are issued by Central and State Governments. These bonds are called gilt edged securities. There are different types of bond Straight bonds, Zero coupon bonds, Floating rate bonds, bonds with embedded options, commodity linked bonds etc. These are dealt in detail in the later units. Money Market Instruments: Debt instruments which have a maturity of less than one year at the time of issue are called M.M Instruments. The important money market instruments are:

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Q2. This distribution of returns for share Y and the market portfolio M is given below Returns (%) Probability Y Z 0.30 30 -10 0.40 20 20 0.30 0 30 You are required to calculate the expected return of security Y and the market portfolio, the covariance between the market portfolio and security Y and beta for the security. Hint:ERp= 17 ; Covariance PM = - 168.0 ; Beta= -0.636 Q3. Briefly explain the Dow Theory Q4. Explain the strategies for overcoming psychological biases Q5. List the major types of investment risks. Q6. How are the factors identified for APT?

Master of Business Administration - Semester III MF0010 Security Analysis & Portfolio Management - 4 Credits Assignment Set- 2 (60 Marks)

Note: Each Question carries 10 marks. Answer all the questions. Q1. What are derivatives? How are they used to hedge risk? Q2. How is company analysis useful in determining the intrinsic value of a security? Q3. What are the implications of EMH to fundamental and technical analysis?

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Q4. : An 8% coupon, 30-year maturity bond with par value of Rs. 1,000 paying 60 semiannual coupon payments of Rs. 40 each. Suppose that the interest rate is 8% annually, or r = 4% per six-month period.What is the value of the bond? Hint : Rs.810.70 Q5. What are the limitations of CAPM Q6. What are the investment avenues available for investors who wish to make foreign portfolio investments?