FM03
Security
Analysis and Portfolio Management
(For CNM Cases)
Assignment – II
Assignment
Code: 2016FM03A2 Last Date of Submission: 30th
April 2016
Maximum Marks: 100
Attempt all
the questions. All the questions are
compulsory and carry equal marks.
Section-A
1. Discuss in detail Fundamental analysis. List
out the factors that you would consider for the
fundamental analysis of stock of Dabur India for investment.
2. Discuss the Efficient Market Hypothesis
(EMH). What are the forms of EMH and implications of each form? Which form of market does the Indian stock
market exhibit, why?
3. How does the risk of portfolio of assets
differ from the risk of single asset? A
portfolio consists of 3 securities: 1, 2 and 3.
The proportions / weights (w) of these securities are: w1=0.3, w2=0.5
and w3=0.2. The standard deviations
(SD) of returns on these securities
(in percentage terms) are: SD1 = 6 SD2 = 9 and SD3 = 10.
The correlation coefficients
(r) among security returns
are: r12=0.4, r13=0.6 and r23=0.7.
What is the standard deviation of
portfolio return?
4. a. Explain
capital asset pricing model (CAPM). What
are its assumptions?
b. Explain
the dividend discount model of valuing equity shares? What are the merits and demerits of this model?
Section – B
Case Study
You are considering bonds of two companies: A &
B. Company A’s bond pays interest at 12%
and Company B’s at 6% per year. Both
have face value of Rs. 1000 and maturity of three years.
Case Questions:
a. What
will be the values of bonds if the market interest rate is 9%?
b. What
will be the values of the bonds if the market interest rate rises to 12 %?
c. Which
bond declines more in value when the interest rate rises? What is the reason?
d. If
the interest rate falls to 6%, what are the values of the bonds?
e. The maturity of two bonds
is 8 years (rather than 3 years), what will be the values of two bonds if the market interest rate is 9
%?
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