SVKM’s NMIMS MUKESH PATEL SCHOOL OF TECHNOLOGY MANAGEMENT é& ENGINEERING Programme: MBA TECH (All STREAMS) Year: V Semester: X ; Academic Year: 2016-17 Subject: Financial Planning and Portfolio Management~ Marks: 60 Time: 10.00 am to 12.00 noon Date: 05 May 2017 Durations: 2 (Hrs) No. of pages: _2_ Final-Examination Instructions: Candidates should read carefully the instructions printed on the question paper and on the cover of the Answer Book, which is provided for their use. 1) Question No.1 is compulsory. 2) Out of remaining questions, attempt any 4 questions. 3) In all 5 questions to be attempted. 4) Alll questions carry equal marks. 5) Answer to each new question to be started on a fresh page. 6) Figures in brackets on the right hand side indicate full marks. 7) Assume Suitable data if necessary 1 (a) i) Suppose you buy 100 shares of Abolishing Corporation at the beginning of year 1 for $80. Abolishing Corporation pays no dividends. The stock price at the end of year i is $100, $120 at the end of year 2, and $150 at the end of year 3. The stock price declines to $100 at the end of year 4, and you sell your 100 shares. Calculate geometric average return for 4 years. (2) ii) . Suppose you purchase one share of the stock of Volatile Engineering Corporation at the beginning of year 1 for $36. At the end of year 1, you receive a $2 dividend, and buy one more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share), and sell the shares for $36.45 each. Calculate the dollar-weighted return on your investment. (2) iii) Suppose you purchase one share of the stock of Cereal Correlation Company at the beginning of year 1 for $30. At the end of year 1, you receive a $1 dividend, and buy one more share for $72. At the end of year 2, you receive total dividends of $2 (i.e., $1 for each share), and sell the shares for $67.20 each. Calculate the time-weighted return on your investment. (2) 1 (b). The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: (3*2=6) { Average Retum — | Standard Residual Variance [Bea Deviation Monarch | 16% 26% 1% Lis Market Portfolio | 12% [22% % 1 Va‘The risk-free return during the sample period was 4%. 1. Calculate Sharpe's measure of performance for Monarch Stock Fund. I. Calculate Treynor's measure of performance for Monarch Stock Fund. Il, Calculate Jensen's measure of performance for Monarch Stock Fund. 2, Assume you are considering a portfolio containing two assets, A and B. Asset A will represent 49% of the dollar value of the portfolio, and asset B will account for the other 55%. ‘The expected returns over next 6 years, 2009-14, for each of these assets are summarized in the following table. (12) Retumon | Return on Calculate the average return and standard deviation of returns for Assets A and B. Find the portfolio’s expected return for EACH of the 6 years. Calculate the (arithmetic) average expected portfolio return, over the 6-year period. Calculate the standard deviation of expected portfolio retums, over the 6-year period. How would you characterize the correlation of the returns of the two assets A and B (no calculations are necessary)? Discuss any benefits of diversification achieved through creation of the portfolio, 3. Please help Mr. David in constructing an optimum portfolio if the expected market return is 15%, market variance is 20% and risk free rate of return is 8%. With the help of given information. (12) Security Expected Retum Beta —__[Unsystematic Risk I 20 12 20 2 14 1.0 30 3 12 2.0 40 4 16 8 20 5 24 Ll 1S 6 » [18 10 50 7 19 08 16 8 13 13 25 9 ul 15 30 10 9 1.6 10 4, What do you'mean by CAPM and explain its application in portfolio selection. 2) 5, What is formula plan in portfolio management? Discuss the various methods of formula plans in detail. (12) 6, Write a short note on any three: (@GY4=12) a. Cyclical stock b. Value stock c. Income stock d. Growth stock as 2p