SHANTI BUSINESS SCHOOL

PGDM TRIMESTER- III END TERM EXAMINATION

JULY - 2015
SECURITY ANALYSIS
TIME: 3 HRS. Max. Marks: 100
Instructions:
1. The answers to Part A (MCQ) questions are to be written only in OMR sheet provided to you.
2. Only 30 minutes will be given to answer the MCQ. After that it will be collected . Use only
blue/black pen to darken the circle of OMR sheet.
3. Answers should be written neatly, briefly and to the point.
4. Main and sub question numbers should be clearly specified in the answer book.
5. Answer to sub questions of main question should be written in continuous sequence.

PART A
Total Marks: 25
A. True / False
1. The holding period return (HPR) is equal to the holding period yield (HPY) stated as a percentage.
a) True
b) False
2. A market is a mean through which buyers and sellers are brought together to aid in the transfer of
goods and/or services.
a) True
b) False
3. A market where prices adjust rapidly to new information is considered to be efficient.
a) True
b) False
4. The balance sheet shows what assets the firm controls at a point in time and how it financed the
assets.
a) True
b) False
5. Fundamentalists typically use the “Bottom-Up Approach” whereas technicians use the “Top-Down
Approach” to the valuation process.
a) True
b) False
6. If the estimated value of an asset is greater than the market price, you would want to buy the
investment.
a) True
b) False

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7. If the intrinsic value of an asset is greater than the market price, you would want to buy the
investment.
a) True
b) False
8. An example of a discounted cash flow valuation technique is the Price/Cash Flow ratio.
a) True
b) False
9. Leading indicators of the business cycle include economic series that reach peaks or troughs before
the peaks and troughs of the overall economy.
a) True
b) False
10. Changes in the dividend payout ratio are positively related to changes in the retention rate.
a) True
b) False

B. Multiple Choice
11. The nominal risk free rate of interest is a function of
a) The real risk free rate and the investment's variance.
b) The prime rate and the rate of inflation.
c) The T-bill rate plus the inflation rate.
d) The real risk free rate and the rate of inflation.
12. The ability to sell an asset quickly at a fair price is associated with
a) Business risk.
b) Liquidity risk.
c) Exchange rate risk.
d) Financial risk.
13. Which of the following is not a secondary equity market?
a) Treasury market
b) National exchanges
c) Regional exchanges
d) Over-the-counter market
14. An order that specifies the highest buy or lowest sell price is a
a) Limit order.
b) Short sale.
c) Market order.
d) Stop loss.
15. Which of the following would be inconsistent with an efficient market?
a) Information arrives randomly and independently.
b) Stock prices adjust rapidly to new information..

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 c) Price changes are random.
d) Price adjustments are biased.
16. Studies of the relationship between P/E ratios and stock returns have found that
a) Low P/E stocks of large cap stocks outperformed low P/E stocks of small cap stocks.
b) Low P/E stocks of small cap stocks outperformed high P/E stocks of large cap stocks.
c) High P/E stocks of large cap stocks outperformed low P/E stocks of small cap stocks.
d) High P/E stocks of large cap stocks outperformed high P/E stocks of small cap stocks.
17. The market liquidity of a security can be measured using
a) Trading turnover.
b) Bid-Ask spread.
c) Price of the security.
d) a) and b).
18. Which of the following is not considered a basic economic force?
a) Fiscal policy
b) Monetary policy
c) Inflation
d) P/E Ratio
19. The process of fundamental valuation requires estimates of all the following factors, except
a) The economy's real risk-free rate.
b) The risk premium for the asset.
c) The times series of stock prices.
d) The expected rate of inflation.
20. Which of the following factors influence an investor’s required rate of return?
a) The economy’s real risk-free rate (RFR)
b) The expected rate of inflation (I)
c) A risk premium
d) All of the above
21. If interest rates increase due to inflation, but expected cash flows to a firm do not change, then you
would expect stock prices to
a) Decline.
b) Rise and then decline.
c) Remain unchanged.
d) Rise.
22. Technical analysis differs from fundamental analysis in that
a) Technical analysts contend that in-depth assessments of basic aggregate market, industry, and
company performance is necessary; past price movements indicate future price movements.
b) Technical analysts believe the market value of common stocks is determined by the interaction
of supply and demand.

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 c) Technical analysts argue that the market constantly weighs rational and irrational factors and
that both of these affect price.
d) Technical analysts depend far more heavily on objective, data-based approaches than the
fundamentalists do.
23. The Dow Theory describes stock prices as moving in trends analogous to the movement of water.
Which of the following statements is not true?
a) Major trends resemble tides.
b) Intermediate trends resemble waves.
c) Short-run movements are like ripples.
d) Waves are the most important
24. Which of the following statements is true?
a) At a support level, the technician would expect an increase in the demand for a stock.
b) At a resistance level, the technician would expect an increase in the demand for a stock.
c) At a resistance level, the technician would expect any price increase to reverse abruptly.
d) At support level, the technician would expect an increase in the supply for a stock.
25. The price paid for the option contract is referred to as the
a) Forward price.
b) Exercise price.
c) Striking price.
d) Option premium.

PART B
Total Marks: [5x8=40]

1. What are different types of risk? How do they affect investment? 8

2. What are the different tax aspects with respect to investment? Why should you consider the same
before taking investment decision? 8
3. How will you analyze current state of Indian economy? Explain with proper data and examples. 8
4. Write in brief about Dow Theory and Elliott Wave Theory. How are they useful in identifying
market trends and taking position? Explain with appropriate examples.
8
5. A) Explain the concept of impact cost with example.
B) You have concluded that next year the following relationships are possible:
Economic Status Probability Rate of Return
Weak Economy .15 -5%
Static Economy .60 5%
Strong Economy .25 15%

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Calculate expected rate of return and standard deviation. 8
PART C
Total Marks: [35]
A) Analyze the following case of State Bank of India. 20

Snapshot
MARKET CAP (RS CR) 200,542.34
P/E 15.30
BOOK VALUE (RS) 158.43
DIV (%) 300.00%
INDUSTRY P/E 10.31
EPS (TTM) 17.32
P/C 14.40
PRICE/BOOK 1.67
DIV YIELD.(%) 1.13%
FACE VALUE (RS) 1.00

Key Ratios Mar '15 Mar '14 Mar '13 Mar '12 Mar '11
Investment Valuation Ratios
Face Value 1.00 10.00 10.00 10.00 10.00
Dividend Per Share 3.50 30.00 41.50 35.00 30.00
Operating Profit Per Share (Rs)23.38 199.45 236.63 271.65 165.38
Net Operating Profit Per Share
204.13 1,826.36 1,749.29 1,587.40 1,281.80
(Rs)
Profitability Ratios
Interest Spread 6.26 5.76 5.95 6.87 6.12
Net Profit Margin 8.59 7.03 10.39 9.68 7.58
Return on Long Term Fund (%)90.85 87.28 96.35 97.36 98.20
Return on Net Worth(%) 10.20 9.20 14.26 13.94 11.34
Management Efficiency Ratios
Interest Income / Total Funds 7.94 8.12 8.25 8.32 7.15
Non Interest Income / Total
1.18 1.10 1.11 1.12 1.39
Funds
Operating Expense / Total Funds1.96 2.05 1.94 1.96 1.93
Loans Turnover 0.12 0.12 0.13 0.13 0.12
Total Income / Capital Employed
9.11 9.22 9.35 9.45 8.54
(%)
Asset Turnover Ratio 0.08 0.09 0.09 0.09 0.08
Profit And Loss Account Ratios
Other Income / Total Income 12.90 11.98 11.82 11.87 16.28
Operating Expense / Total
21.47 22.20 20.74 20.73 22.66
Income
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 Balance Sheet Ratios
Capital Adequacy Ratio 12.00 12.96 12.92 13.86 11.98
Advances / Loans Funds(%) 77.39 82.04 82.25 78.01 77.19
Debt Coverage Ratios
Credit Deposit Ratio 84.47 86.84 85.17 82.14 79.90
Total Debt to Owners Fund 12.28 11.79 12.16 12.43 14.37
Financial Charges Coverage Ratio
0.41 0.38 0.43 0.52 0.54
Leverage Ratios
Current Ratio 0.04 0.03 0.04 0.05 0.04
Quick Ratio 10.78 13.88 12.15 12.05 8.50
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit
19.51 20.56 20.12 20.06 25.84
Earnings Per Share 17.55 145.88 206.20 174.46 116.07
Book Value 172.04 1,584.34 1,445.60 1,251.05 1,023.40

Share
September
holding March 2015 December 2014 June 2014 March 2014
2014
pattern
Promoter
and
58.60% 58.60% 58.60% 58.60% 58.60%
Promoter
Group
Indian 58.60% 58.60% 58.60% 58.60% 58.60%
Foreign -- -- -- -- --
Public 39.25% 39.28% 39.27% 39.31% 39.27%
Institution
30.45% 30.99% 31.24% 31.73% 30.53%
s
FII 11.72% 11.95% 11.18% 11.05% 9.68%
DII 18.73% 19.04% 20.06% 20.68% 20.85%
Non
8.80% 8.29% 8.03% 7.58% 8.74%
Institutions
Bodies
2.40% 2.61% 2.58% 2.18% 2.15%
Corporate
Custodians 2.15% 2.12% 2.13% 2.09% 2.13%
7,46,57,30,92 7,46,57,30,92 74,65,73,09 74,65,73,09 74,65,73,09
Total
0 0 2 2 2

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B) Analyze the following charts: 15
1.

2.

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