SULIT MFB3013/A181/A, USIM FINAL EXAMINATION SEMESTER I, ACADEMIC SESSION 2018/2019 [ [ DATE: JANUARY 2010 DURATION : 3 HOURS MFB3013 PORTFOLIO MANAGEMENT (PENGURUSAN PORTFOLIO) INSTRUCTIONS TO CANDIDATES: 1. This paper contains SEVEN (7) questions. Answer FIVE (5) questions in the Answer Booklet provided 3. Candidates are not allowed to bring any materials except stationeries and financial calculator into the examination halll without prior permission 4. Candidates are not allowed to take question paper out of the examination hall Please complete your particulars in Borang H and the Answer Booklet. DO NOT OPEN THIS QUESTION PAPER UNTIL YOU ARE INSTRUCTED TO DO SO f This question paper has SEVEN (7) printed pages excluding this cover page re) HAKCIPTA TERPELIHARA USIMSULIT This section contains SEVEN (7) questions. Answer FIVE (5) questions. Question 4 ABDULLAAH INVESTMENT PROFILE MFB3013/A181/A, [100 Marks] Abdullah, your ex-school mate met you at a coffee shop to get some advice on investment from you. You have been listening to him for about an hour and decided to do some profiling for Abdullah. After getting some facts finding, below are the information gathered from Abdullaah. Case Facts Type of investor Individual, surgeon, 55 years of age, in good health ‘Asset base 2 million Stated return desire or investment goal |10 percentage point above the average annual return on KLSE small cap stocks ‘Annual income needs z 150,000 ‘Annual income form non-portfolio sources _| 250,000 from surgical practice Other return factors: Inflation is 3% Risk considerations ‘Own large concentration in small cap KLSE stocks ‘Specific liquidity requirements RM70,000 charitable donation in 10 months [Time specification Required: Retirement at 70 a) _ Briefly explain Abdullah's investment profile based on the followings: i) Willingness to accept risk ii) Ability to accept risk ili) Risk tolerance iv) Liquidity requirement v) Time horizon (10 marks) b) Discuss appropriate Abdullaah’s objectives based on risk and return. (10 marks) [Total: 20 marks] HAKCIPTA TERPELIHARA USIM 1SULIT MFB3013/A181/A, Question 2 a) Briefly explain the concept of the Efficient Market Hypothesis (EMH) and each of its THREE (3) forms: i) Weak, ii) Semi- strong, and iil) Strong (10 marks) b) Briefly discuss the implication of the EMH for investment policy as it applies to i) Technical analysis in the form of charting ( marks) ii) Fundamental analysis ( marks) [Total: 20 marks] Question 3 ‘The information about the global market as the time access is shown above. ococased 00 6066000000600000 Required: You are planning to build a portfolio and one of your consideration is looking at global indices performance. Briefly explain what is Economic, Industry, and Company (EIC) analysis and how it can be used to optimize your portfolio return. [Total: 20 marks] HAKCIPTA TERPELIHARA USIM 2SULIT MFB3013/A181/A, Question 4 a) The following portfolios are being considered for investment. During the period under consideration, risk free rate (RFR) is = 0.07 Portfolio Return Beta Gi P 015 7.0 0.05 Q 0.20 18 0.10 R 0.10 06 0.03 Ss 0.17 be 0.06 Market 0.13 1.0 0.04 i) Compute the Sharpe measure for each portfolio and market portfolio. (5 marks) ii) Compute the Treynor measure for each portfolio and market portfolio, (5 marks) b) Consider the following historical performance data for two different portfolios, the KLCl and the 90 — day T- Bill Investment Average Return Standard Beta R Vehicle Deviation cs Fund 4 264 20.67 1351 0751 Fund 2 13.22 14.2 0.905 0.713 kul 15.71 13.25 90- day T-Bill 6.20 0.50 i) Calculate the Fama overall performance measure for both funds (Fund 1&2), (5 marks) ji) For both funds (Fund 1 & 2), compute the measures of: 1. Selectivity and diversification (5 marks) [Total: 20 marks] HAKCIPTA TERPELIHARA USIM 3SULIT MFB3013/A181/A Question 5 You have just received stock picks from an analyst recently. There are several stocks were recommended and they are currently at a very low price. Alll the stocks are penny stocks. If you are considering building a portfolio of penny stocks apart from the existing mid and big cap portfolios, you need to evaluate the penny stocks portfolio potential return Inputs Expected Standard Return Deviation Riskless Rate (r) [_40%[ 0.0% Glotec 11.111% | 6.095% FPGroup 17.568% | 4.751% Zecon 32.051% | 9.114% | Correlations Glotec | FPGroup_| Zecon _| Pasdec | Aliya Glotec 100.0% | 45.9% | 18.9% | 32.7% | -21.0% FPGroup 45.9% | 100.0% | -13.4% | -68.3% | 18.3% Zecon 18.9% | -13.4% | 100.0% | -60.4% | 32.6% Required: Given the information given on penny stock in Bursa Malaysia. i) Calculate the covariances matrix. (10 marks) ii) Calculate the portfolio return assuming equal weightage. (5 marks) iii) Illustrate of the individual stocks in an efficient frontier diagram (5 marks) [Total: 20 marks] HAKCIPTA TERPELIHARA USIM 4SULIT MFB3013/A181/A, Question 6 a) _ Differentiate between growth stock and growth company (3 marks) b) Discuss the following terms ) Defensive stocks it) Cyclical stocks (3 marks) ©) You are given the following information about semi-conductor firms and the KLCI index: : CoA CoB KCCI PIE ratio 30 27 18 Expected annual 0.18 0.15 0.07 growth rate Dividend yield 0 0.01 0.02 i) Compute the growth of each company stock relative to KLCI. (8 marks) ii) Compute the growth duration of Co A relative to Co B. (4 marks) ili) Based on your answers, determine your investment decision. (2 marks) [Total: 20 marks] HAKCIPTA TERPELIHARA USIM 5SULIT MFB3013/A181/A Question 7 The Large cap shares index (KLCI index) and the bond index data is shown in the following table. Government Bonds Large Cap KLCI index | Expected return (%) 4% 13% Variance 100 225 Standard deviation 10 15 Correlation 06 Required: a) __ Ifthe ratio of the investment is 50:50 for shares and bonds. b) a) i) Calculate the expected mean return and standard deviation for the portfolio, (5 marks) If the ratio of the investment is 70:30 for shares and bonds and the expected retum for the index increased by 2%. i) Calculate the expected mean return and standard deviation for the portfolio. (5 marks) Explain the importance of divers fication. (5 marks) Describe how you can diversify a portfolio given the data about the individual asset return, standard deviation and correlation of coefficients in terms of your Portfolio risk and return. (5 marks) END OF QUESTIONS Dicotak oleh: Unit Peperiksaan dan Pengijazahan Bahagian Pengurusan Akademik Universit Sains Isiam Malaysia HAKCIPTA TERPELIHARA USIM 6SULIT re | MFB3013/A181/A, Finance Formula Sheet Covariance benween time series xandy: 4, Dee-sf Variance of asset: 2 Beta of security = f, " Expected rtm on equity (tock) = £(¢,)=1f + [E(r,) = also known asthe CAPM alternatively = divide yield plus expocied growth Rewrn on Assets = NEttneom, : *S* Total Assets Netncom hte Shi HAKCIPTA TERPELIHARA USIM 7