Code No: R17MBA34

R17
MALLA REDDY COLLEGE OF ENGINEERING & TECHNOLOGY
(Autonomous Institution – UGC, Govt. of India)
M.B.A - III Semester supplementary Examinations, Aug 2017
Security Analysis and Portfolio Management
(MBA)
Roll No

Time: 3 hours Max. Marks: 70

Note: This question paper Consists of 5 Sections. Answer FIVE Questions, Choosing ONE
Question from each SECTION and each Question carries 14 marks.

SECTION-I
Q1. “No investment is risk free’. In view of this statement, write an easy on the meaning and
types of investment-risks. Can this be eliminated or minimized?
(OR)
Q2. What is investment? Describe the different Investment alternatives available in Indian
Financial System and the process of investment undertaken by the investors?

SECTION-II
Q3. “Industry life cycle exhibits the status of industry and gives the clue to entry and exit for
investors”. Elucidate
(OR)
Q4 “Moving averages not only smoothen the data, but also predict the market.” Comment on it.

SECTION-III
Q.5 Explain the CAPM model, its assumptions and formulations. Do you agree that this
model is still applicable in estimating the stock return?
(OR)
Q.6Stock L and M have yielded the following returns for the past two years

Years Return %
L M
2015 12 14
2016 18 12

a) What is the expected return on the portfolio made up of 60% of L and 40% of M
b) Find out the standard deviation of each stock
c) What is the covariance and coefficient of correlation between stock L and M
d) What is the portfolio risk of a portfolio made-up of 60% of L and 40% of M?
 SECTION-IV

Q.7. “Stocks are considered to be risky but bonds are not.” This is not fully correct. Elucidate.
(OR)
Q. 8. a. Determine the present value of the bond with a face value of Rs.1000, coupon rate of
Rs.90, a maturity period of 10 years for the expected yield to maturity of 8%.
b. If the maturity period is equal to 7 years in the above example, determine the present
value of the bond.
SECTION-V
Q9.How are the returns of managed portfolios calculated. Discuss in relation to Sharpe,
Treynor and Jenson model
(OR)
Q10. What are the objectives of Mutual Funds and explain about the different types of
Mutual Funds
******
Code No: R17MBA34
R17
MALLA REDDY COLLEGE OF ENGINEERING & TECHNOLOGY
(Autonomous Institution – UGC, Govt. of India)
M.B.A - III Semester supplementary Examinations, Aug 2017
Security Analysis and Portfolio Management
(MBA)
Roll No

Time: 3 hours Max. Marks: 70

Note: This question paper Consists of 5 Sections. Answer FIVE Questions, Choosing ONE
Question from each SECTION and each Question carries 14 marks.

SECTION-I
Q1. “Without adequate information the investor cannot carry out his investment programme”.
Elucidate. What are the sources of investment information? (14 Marks)
(OR)
Q2. Explain the importance of earnings, dividend payout and required rate of return in estimating
the theoretical value of the stock. (14 Marks)
SECTION-II
Q3.What is meant by fundamental analysis? How does fundamental analysis differ from
technical analysis. (14 Marks)

(OR)
Q4. a. How do volume and breath of the market indicate the trend of the market? (7 Marks)
b. What are the empirical evidences of the weak form of market efficiency? (7 Marks)

SECTION-III
Q5. What are the different evaluation techniques used for measuring the performance of
the portfolio?
(OR)
Q6. An investor wants to build a portfolio with the following four stocks. With the given details,
find out his portfolio and portfolio variance. The investment is spread equally over the stocks.

Company α β Residual Variance

A 0.17 0.93 45.15
B 2.48 1.37 132.25
C 1.47 1.73 196.28
D 2.52 1.17 51.98
Market Return (𝑅𝑚 ) = 11; Market return variance = 26
 SECTION-IV
Q7. How do you assess the present value of the bond? Explain the various bond value theorems
with examples.
(OR)
Q8. a. Ann’s bond portfolio manager advise her to buy a 7 year, Rs.5000 face value bond that
gives 8% annual coupon payments. The appropriate discount rate is 9%. The bond is currently
selling at Rs.4700. Should Ann adhere to the manager’s advice?
b. Determine the price of a Rs. 1000 zero coupon bond with a YTM of 15% and 10 years to
maturity.
SECTION-V
Q9. What are different types of mutual funds? Explain how their performance be evaluated.

(OR)
Q10. Write a detailed note on Trends in Indian Mutual Funds.

******
Code No: R17MBA34
R17
MALLA REDDY COLLEGE OF ENGINEERING & TECHNOLOGY
(Autonomous Institution – UGC, Govt. of India)
M.B.A - III Semester supplementary Examinations, Aug 2017
Security Analysis and Portfolio Management
(MBA)
Roll No

Time: 3 hours Max. Marks: 70

Note: This question paper Consists of 5 Sections. Answer FIVE Questions, Choosing ONE
Question from each SECTION and each Question carries 14 marks.

SECTION-I
Q1. What is investment? Describe the different Investment alternatives available in Indian
Financial System? (14 Marks)
(OR)
Q2.(a) Anup wants to purchase the stock of company A and B. He estimates the return and
probability of returns by analyzing the past records. With the given details, find out the expected
return. (7 Marks)
Return Probability
A B
8% -2% 0.15
10% 6% 0.20
12% 10% 0.30
13% 15% 0.20
14% 20% 0.15

(b) Discuss the role of P/E Ratio in making the sell and buy decision. (7 Marks)

SECTION-II
Q3.Do you think that knowing the current status of economy is useful in analyzing stock market
movements? Is so explain using EIC framework. (14 Marks)

(OR)
Q4 Define the various forms of the Efficient Market Hypothesis (EMH). Also state the
anomalies in the efficient market hypothesis.

SECTION-III
Q5. Explain the CAPM theory and its validity in the stock market. Also distinguish between
CAPM and Arbitrage Pricing Theory.
(OR)
Q6. A financial analyst is analyzing two investment alternatives of Z and Y. The estimated rates
of return and their chances of occurrence for the next year are given in the table below.

Probability of occurrence Rate of Return

Y Z
0.20 22% 5%
0.60 14% 15%
0.20 -4% 25%

(a) Determine each alternatives’ expected rate of return, variance and standard deviation.
(b) Is Y comparatively riskless?
(c) If the financial analyst wishes to invest half in Z and another half in Y, would it reduce
risk? Explain.

SECTION-IV
Q7. What is convexity of Bond? Explain in detail with the help of the yield curve and different
theories.

(OR)
Q8. Calculate the duration for bond A and bond B with 7% and 8% coupons having maturity
period of 4 years. The face value is Rs.1000. Both the bonds are currently yielding 6 %.

SECTION-V
Q9.Why Sharpe’s and Treynor’s measures of performance give conflicting performance
ranking? Which do recommend and Why?
(OR)
Q10. “Investing in Mutual Funds is a wise decision, but one needs to wait to experience good
returns”- Discuss.
******
Code No: R17MBA34
R17
MALLA REDDY COLLEGE OF ENGINEERING & TECHNOLOGY
(Autonomous Institution – UGC, Govt. of India)
M.B.A - III Semester supplementary Examinations, Aug 2017
Security Analysis and Portfolio Management
(MBA)
Roll No

Time: 3 hours Max. Marks: 70

Note: This question paper Consists of 5 Sections. Answer FIVE Questions, Choosing ONE
Question from each SECTION and each Question carries 14 marks.

SECTION-I
Q1. Distinguish carefully between investing and speculating. Is it possible to incorporate
investment and speculation within the same security? Explain. (14 Marks)
(OR)
Q2.An investor has choice of four stocks for investment. Their rates of return and probabilities
are given below. (14 Marks)
A B C D
R (%) P R (%) P R (%) P R (%) P
-30 0.2 -20 0.15 -20 0.2 -10 0.1
0 0.4 0 0.35 10 0.4 0 0.25
30 0.3 20 0.45 40 0.3 10 0.4
70 0.1 40 0.05 80 0.1 20 0.25
(a) Are all these stocks attractive investments? Give reasons
(b) Of those that are attractive, how should the investors choose one to buy?

SECTION-II
Q3.Explain in detailed the Dow Theory. How it is used to determine the directions of stock
markets. (14 Marks)
(OR)
Q4. a. Assume that you know for certain that the market is heading towards the boom period.
Should you buy a common stock based upon this information? (7 Marks)
b. Explain the strong form of market efficiency with empirical evidences. (7 Marks)

SECTION-III
Q5. Monthly return data (in per cent) are presented below for SBI stock and NSE national index
for a 12 month period.
Month 1 2 3 4 5 6 7 8 9 10 11 12
SBI 9.43 0.00 -4.31 -18.92 -6.67 26.57 20.00 2.93 5.25 21.45 23.13 32.83

NSE 7.41 -4.33 -7.35 -14.64 1.58 15.19 5.11 0.76 -0.97 10.44 17.47 20.15

Calculate beta of SBI stock

(OR)
Q6. Explain the nature of portfolio risk if two securities are (a) perfectly positively correlated (b)
perfectly negatively correlated and zero correlation. Illustrate your answer with diagram.

SECTION-IV
Q7. a. How would you immunize the bond portfolio using the immunization techniques?
b. A bond of Rs.1000 face value, bearing a coupon rate o 12% will mature after 8 years.
What is the value of the bond if the discount rates are 16% and 14%.
(OR)
Q8. a. Find out the yield to maturity on a 8% 5 year bond selling at Rs.105?
b. Anand owns Rs. 1000 face value bond with five years to maturity. The bond has an
annual coupon of Rs.75. The bond is currently priced at Rs.970. Given an appropriate discount
rate of 10%, should Anand hold or sell the bond?

SECTION-V
Q9.The following information is provided regarding the performance of the funds namely Birla
Advantage, Sundaram Growth and Sun F & C Value for the period of six months ending August
2009. The risk free rate of interest is assumed to be 9. Rank them with help of Sharpe Index and
Treynor Index and discuss.
Funds 𝑹𝒑 𝝈𝒑 β
Birla Advantage 25.38 4 0.23
Sundaram Growth 25.11 9.01 0.56
Sun F & C Value 25.01 3.55 0.59

(OR)
Q10. What is meant by mutual funds? What are the advantages of professionally managed
portfolio? Distinguish between the open-end and close-end mutual funds.
******