Ajay Kumar Garg Institute of Management, Ghaziabad

Sessional Test-2
Course: MBA Semester: IV
Session: 2016-17 Section: 1, 2
Subject: Behavioral Finance Sub Code: NMBA-044
Max Marks: 50 Time: 2 hrs

SECTION-A
Q1. Attempt all questions. Each question carries 2 Marks. [25= 10]

a) Differentiate between ambiguity aversion and risk aversion.

b) What are the major applications of cognitive psychology?
c) What is noise trading?
d) Define bubble.
e) How is individual rationality different from group rationality?

SECTION-B
Note: Attempt any three questions and each question carries 10 marks. [310= 30]
Q2. Explain the risk- averse behaviour of investor with the help of expected utility of theory?
Q3. Explain the different Behavioural biases in detail.
Q4. Who is investor? What are the different types of investors? How average investors are
different from simple investors.
Q5. What is Ellsbergs paradox? Explain in detail.
Q6. What are the different types of arbitrage? Explain in detail.
SECTION-C
Note : Attempt all questions. Each question carries 5 marks. [25 = 10]

Q7. The XY company stocks return depends heavily on the market return, the beta being 1.4, the
risk free rate of return is 8 per cent and the market return is 15 per cent.

(a) Determine the expected return for XY stock.

(b) What happens to expected return, if the market returns increases to 20 percent?
(c) What happens to the return if beta falls to .90 while the other inputs remain the same?
Q8. Stocks X and Y display the following returns over the past three years.
(a) What is the expected return on portfolio made up of 40 per cent of X and 60 per cent of
Y?
(b) What is the standard deviation of each stock?
(c) Determine the correlation co-efficient of stock X and Y.