OR

Code No: OR-305/MBA
M.B.A. III-Semester Examinations, December-2006. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT Time: 3 hours Max. Marks: 60 Answer any FIVE questions All questions carry equal marks --1. What are the classifications and functions of financial markets? 2. 3. Discuss in detail the regulatory systems for equity markets. Investors assessment of return on a share of Xylene Corporation under three different scenarios is as follows: Scenario Chance Return (%) 1 0.25 36 2 0.50 26 3 0.25 12 How investors make an overall assessment about the return on the share based on the above anticipated returns under different scenarios? The current market price of Durable Tyres Ltd., and Hi-tech systems are Rs.50/- and Rs.100/- respectively. It is expected that they will pay a dividend of Re1/- and Rs.4/- for the next year on projected earnings of Rs.2.50 and Rs.6.00 respectively. The earnings and dividends for these two companies are expected to grow at the rate of 15% and 12% per annum respectively. Analysts estimated that it is equally likely that price of Durable’s stock would be Rs.55 or Rs.60 and that of Hi-tech would be Rs.108 or Rs.116 at the end of one year. a) Examine the returns on both of these and select a stock for an investment period of one year b) If you have to invest on a long term basis, which stock do you find more under valued? Explain the required rate of return is 16% on both these stocks. An investor writes one call option and one put option. The premiums on these options are Rs.2/- and 4/- respectively. For the call option, the exercise price and the stocks current market price are Rs.25 and Rs.22 respectively, while for the put option, they are Rs.35 and Rs.33. Calculate the margin that the investor has to deposit with the brokerage firm? Each contract is for 100 shares. Explain in detail the Capital Asset Pricing Model. What is Portfolio management of stocks. In this Context explain portfolio risk? Explain the following: a) Hedging Techniques b) Interest Rate futures c) Valuation of fixed income securities *****

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