USN IOMBAFM322/BF372

Third Semester M BA Degree Exami natio n, Ju ne/July 2013

Security Analysis and Portfolio Manageme n t

Time: 3 hrs. Max. Marks: I00

~ Note: I. Answer any FOURfull questions from Q.No.l to 7.
2. Q.No. 8 is compulsory.
I a. Dist ingui sh between investment and specu lation. (OJ Ma r ks)
b. What is Risk? Exp lain the various types of risk.
."" (07 Marks)

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-a"
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2
c.
a.
Describe the vario us investment avenues available to investors in India.
r e-.
What is free float market capitalization?
b. Explain the trading and settlement procedure in NSE. ~
,..I
(03 Marks)
(07 Marks)
(10 Ma r ks)

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c. Mr. Basava 0\\115 a po rt f0 lio
10 comoosed
compose at
Security

ACC
of tour
Bela

1.05
. . II0 wing characterist ics:
securities wit t eta
Standard deviation of Pr~P<lf1ion
Random error term.
12 , 0.30""
ASS 0.90 10 . 0.30
ITC 1.20 15 \ 0.25
L&T 1.00 II 0.15
If the standa rd deviation of the market mdex IS 20%, what IS the total risk of Basava ' s
portfo lio? -n J <?) ~ (10 Marks)

a. The preference shares of X Ltd.. a~selling for ~ 44 per share in the market and pay a ~ 4.40
annua l dividend. Ifan investor required rate of return is 12%, what is the value ofpreference
share for that investor? "..)..- (03 Marks)
b. Expla in the key indicator s of industry analysis. (07 Marks)
c. The stock of Wipro performs well relat ive to other stocks during recessionary periods. The
stocks of lnfosys, on the other hand do well during growth period. Both the stocks are
currently selling for ~ 5 0 per share. The rupee returns (dividend plus price change) of these
shares for the next year would be as follows: ~
V Economic Condition
C, l!igh Gro\Vlh Low Gro\Vlh "-Stagnation Recession
Probability 0.30 0.30 0 .2~~ 0.20
Return on Wipro '{55 f50 ~60 / ~ 70
Return on Infosys ~ 75 f65 f 50 ~.1"') f40
Calculate the expected return and standard deviation of: (i) ~ 500 in the equity stock of
Wipro and f500 in the stock ofInfosys. (ii) ~700 in the stock ofWiQro and ~ 3 00 in the
equity stoc k oflnfosys. Which of the above option wou ld you choose? .7 ( 10 Marks)
a. What is efficient frontier? (" 'r" ( 03 Marks)
b. . Calculate the expected rate of return from the following information: '
Risk free rate of return: 9% Expected market return: 15%
Standard deviation of the security: 2.4% Market standard deviation : 2.0%
Correlation coefiicient of the security with the market 0.9. (07 Marks)
c. What is an efficie nt market? Explain the forms of market efficienc y? Describe the tests of
"': N
different forms of market efficiency. ( 10 Marks)

z~ 5 a. What is an Asset Management company? (03 Marks)

E b. Explain the basic tenets of Dow theory. (07 Marks)
E
8. c. You are an investor in fixed income securities. Your portfolio of bond does not have bonds
.§ from AAA rated companies. You are considering purchase of an AAA rated bond. Two such
bonds from AAA rated companies; Bond A and Bond B are available in the market that have
the following features.
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