Ans 1 Investment Decision Process

The process of investment includes following steps: -

1. Setting up the Investment Policy: The initial step is setting up the investment strategy for the
financial backer. The investment strategy depends on investment objectives or targets, investible
assets, tax status and investment skylines. Different investment goals of a financial backer might be
capital appreciation, standard income, tax benefits and so forth. The investment goals are outlined
according to the risk return inclinations of the financial backers. Each financial backer has an
alternate risk hunger or risk profile which is a fundamental fixing in investment strategy. The
investment objective is additionally connected with the time of investment or investment skyline.
Investment strategy sets the expansive structure for investment decision making by a singular
financial backer.

2. Building up an inventory of securities: This step includes developing a rundown of all suitable
protections wherein a financial backer might make his investment. Contingent on investment goals
and investment skyline, the protections might be sifted. For instance, in the event that a financial
backer's goal is to get standard income at generally safe, value shares which don't deliver customary
profits may not be remembered for the rundown of protections where a financial backer might
contribute.

3. Performing Security Analysis: When a stock or rundown of accessible protections has been made,
the following stage is to break down these protections essentially as for risk and return attributes.
This is known as security examination. The primary thought in security investigation is to appraise
the normal return and risk of individual protections. This may likewise help financial backers in
recognizing underestimated or exaggerated protections and timing of trade choice. There are
different methodologies of safety valuation - Fundamental investigation, technical examination and
Efficient Market Hypothesis (EMH).

4. Constructing portfolios, portfolio analysis and portfolio selection: A portfolio is a blend of at least
two protections in which a financial backer might like to hold investments as opposed to in every
one of the protections accessible for investment. In this way, after security examination, the
following stage is to build all doable portfolios or portfolio opportunity set and choosing ideal
portfolio for the concerned financial backer. Portfolio opportunity set is additionally named as
Investment opportunity Set. It should be noticed that there might be numerous attainable portfolios
by consolidating different protections in various extents, yet every one of them may not be
productive. An Efficient portfolio is one which gives greatest return to a given degree of risk or which
has least risk for a given degree of return. Such productive portfolios may likewise be enormous in
numbers. Subsequently to choose the ideal or best portfolio for the financial backer, one
requirement to consider risk return inclinations of the financial backer.

5. Portfolio Revision: The fifth step in investment choice interaction is portfolio correction. It
comprises of the redundancy of the past four steps in the radiance of changes in investment climate.
Additionally, the investment goals of the financial backer may likewise change extra time and
henceforth there is a need to intermittently modify the initially chosen portfolio. Because of changes
in security costs, the initially assembled portfolio may not stay ideal and subsequently the financial
backer necessities to modify it or develop another portfolio. Changes in security costs may likewise
make specific protections alluring, which were not chosen before because of greater costs or may
make specific protections as of now remember for the portfolio, ugly. This calls for occasional
modification of the portfolio.
6. Portfolio performance Evaluation and Management: The last step in the investment interaction is
to assess the exhibition of the portfolio. It suggests deciding occasionally whether the portfolio has
performed better compared to the benchmark portfolio or other comparative portfolios or not.
Portfolio execution assessment might be finished involving outright return as well as different risk
changed return measures like Sharpe proportion, Treynor's proportion or Jensen's alpha. Sharpe
proportion is determined by partitioning abundance return (for example risk premium) by the
absolute risk of the portfolio. It is a proportion of abundance return per unit of risk. The higher this
proportion the better is the exhibition of the portfolio.

Ans 2

Year Share Price Returns (%)

2007 100 _

2008 125 25 (125-100/100 *100)

2009 118 -5.6 (118-125/125*100)

2010 130 10.16 (130-118/118*100)

2011 120 -7.6 (120-130/130*100)

2012 140 16.66 (140-120/120*100)

Total 38.62

(i) Average Return ( based on arithmetic mean) = 38.62/5 = 7.72%

(ii) Average Return ( based on geometric mean)

= [ (1+R1) (1+R2) (1+R3) (1+R4) (1+R5) ]^1/5 – 1

= [ (1+25) (1-5.6) (1+10.16) (1-7.6) (1+16.66) ] ^1/5 – 1

= [ 26*(-4.6)*11.16*(-6.6)*17.66 ]^1/5 -1

= [ 155571.3192 ]^1/5 -1

= 10.92 – 1

= 9.92 %

Ans 3 Yes, I concur Ratio Analysis is significant for assessing the monetary presentation of the
organization since it assists the financial backer with grasping the monetary execution of the
organization through its budget summaries. Proportion investigation are mostly utilized by outside
experts to decide different parts of a business-like benefit, liquidity and dissolvability. Through this
one can assess the monetary presentation of the organization. Monetary proportions are devices
used to survey monetary execution through asset report, income explanation, income proclamation
and so on. Proportion can be delegated liquidity proportion, action proportion, influence proportion,
benefit proportion, valuation proportion. These proportions help in assessing monetary execution of
the organization. Proportions helps in recognizing the region of a business that requires more
consideration and it assists with contemplating and grasp the riskiness of the company's activities.