BWFN3013 CONFIDENTIAL _ @uUUM Universiti Utara Malaysia FINAL EXAMINATION FIRST SEMESTER 2017/2018 SESSION COURSE CODE/NAME : BWFN3013 INVESTMENT ANALYSIS DATE 18 JANUARY 2018 (MONDAY) TIME 19.00 - 11.30AM (2 % HOURS) VENUE : BTA 13-18, BTA 19-24 INSTRUCTIONS: 1. This examination paper contains FIVE (5) questions in THIRTEEN (13) printed Pages, excluding the cover page. Candidates are required to answer ALL questions in the space provided Candidates are NOT ALLOWED to take the examination question out of the| examination hall. Candidates are bound by the UUM’s RULES AND PROCEDURES ON ACADEMIC FRAUD. MATRIC NO.: Coors (numbers) IDENTIFICATION CARD NO.: LI [ L LECTURER’S NAME: GROUP: Cc TABLE NO,: DO NOT OPEN THIS EXAMINATION PAPER UNTIL INSTRUCTED CONFIDENTIAL‘BWEX3013 INVESTMENT ANALYSIS ‘Marie No: QUESTION ONE (20 MARKS) 2) Briefly discuss TWO markets in Malaysian financial system and provide an example for each, (S marks) b) Describe the key features of indic index. Explain what these indices represent using an example of (5 marks)_BWEN3013 INVESTMENT ANALISIS: MATRIC NO: ©) Discuss briefly the differences between options contract and futures contract. (5 marks) 4) Explain the characteristics of money market securities. Provide TWO (2) examples. (5 marks)QUESTION TWO (20 MARKS) BWEN2O13 INVESTMENT ANALYSIS ‘MATRIC NO: a) You are considering two investments alternative - stock A and stock B. Currently the stock A is trading at RM35 per share and you expect to sell the stock 1 year later for RM40, Stock B is currently trading at RM20 per share and you expect to sell the stock in 1 year for RM28. The dividend payments for stock A and B as follows: Stock A | Stock B RMO.30 | RMO.70 RMO.25 | RMO.5S0 RM0.30_| RMO.70 4% Quarter RMO0.35 | RMO.50 } Based on the above information: i) _Caloulate the one year holding period return (HPR) for stocks A and B. (4 marks) ii) Which stock do you prefer for investment? Why? (2 mark)BWEN3013 INVESTMENT ANALYSIS “MATRIC NO: b) Explain the following terms: i) Risk-retumn trade-off (2 marks) ii) Business risk (2 marks) iii) Financial risk (2 marks) iv) Interest rate risk (2 marks)BWENGOI INVESTMENT ANALYSIS: ‘MATRIC NO ©) ARM1I,000 par value, $% annual coupon bond matures in 4 years. The bond is currently priced at RM965,35 and has a YTM of 6.0%. What is the Macaulay duration? (4 marks) d) Explain what happen to the bond’s duration if the bond market undergoes a large change in yield (for example, more than 100 basis points). (2 marks)BIVBN3013 INVESTMENT ANALYSIS MATRICNO: QUESTION THREE (20 MARKS) a) Identify the THREE (3) major parts of security analysis and explain why security analysis is, important to the stock selection process. (8 marks)BWVEN3013 INVESTMENT ANALYSIS ‘MATRIC NO: b) Company X and Company Y are in the same industry and have the following ratios. Company X Compaiy Y_ Industry Average Currentratio 12 0a 1 Debtiequity 020 040 03 Total asset tumover 19 21 25 Net profit margin 42% 38% 40% Return onequity 124% = 148% 150% Dividend payout ratio __25:0% 10.0% 20.0% Discuss the relative natures of the two companies in terms of risk and return. Identify the more growth-oriented firm and justify your selection. Support your discussion and conclusions by referring to the ratios. (8 marks)‘BWEN3013 INVESTMENT ANALYSIS. MATRIC NO. ©) What is the intrinsic value? How does it fit into security analysis process? (4 marks)_BHENGOI3 INVESTMENT ANALYSIS MATRIC NO: QUESTION FOUR (20 MARKS) 2) Compute the Trin Index for the S&P 500 over the following three days: Day | Number of stocks | Number of stocks | Volume of stocks ] Volume of stocks Rising in price | Falling inprice | Risingin price | Falling in price 1 360 160 820 million shares _| 420 million shares 2 270 210 420 million shares | 710 million shares 3 250 230 830 million shares _| 420 million shares Which of the three days would be considered the most bearish? Explain your answer. (6 marks) b) Discuss the implication of Efficient Market Hypothesis (EMH) and Fundamental Analysis (4 marks)LBWEN3013 INVESTMENT ANALYSIS ‘MATRIC NO! c) What is candlestick chart? and Explain the difference between black and white candlestick. (S marks) 4) Discuss why the concept of support and resistance is important to a trader? (S marks)BIENS013 INVESTMENT ANALYSIS MATRIC NO. QUESTION FIVE (20 MARKS) a) Discuss the important of diversification in creating portfolio and the factors to be considered to make sure your diversification is working. (6 marks) b) A portfolio has a total return of 10.5%, a beta of 0.72 and a standard deviation of 6.3%. The risk free rate is 3.8%, the market return is 12.4%. Calculate the Jensen's measure of this portfolio's performance. (4 marks)BIVENS013 INVESTMENT ANALYSIS. MATRIC NO: c) Ella owns a stock with a beta of 1.34 and a standard deviation of 16.4%. The stock has a total return of 14.8%. The market risk premium is 8.5%, while the return on the market portfolio was 12.0%. What is the value of Sharpe's measure for Ella's portfolio? (4 marks) d) Smith just bought 3,000 shares of ABX Incorporation at RM1.20. He then WRITE a call option on the stock to increase his profits. He sells 1000 cails on the stock at market price of 20 cents each, a strike price of RM2, and six months to expiration. The stock pays no dividend. i) How much Smith profit if the price of the stock rises to RM3 a shares and his call option buyer exercised the options? (4 marks)_BWEN3013 INVESTMENT ANALYSIS. "MATRIC NO: ii) If the price only rises to RM1.80, should the call options buyer exercise the option and explain your answer. 2 marks) END OF QUESTIONS 13