Examination Paper: Portfolio Management
1
IIBM Institute of Business Management
IIBM Institute of Business Management
Examination Paper MM.100
Portfolio Management
1. _________ is the market for issue of new securities.
a. Secondary Market
b. Consumer Market
c. Primary Market
d. Stock Market
2. Inflation is measured in terms of either wholesale price or_______.
a. Face Value
b. Retail Prices
c. MRP Value
d. Tax Value
3. _______ is basically a channel through which the savings of investors are made available to
corporations for investment.
a. Consumer Market
b. Stock Market
c. Retail Market
d. Whole sale Market
4. The share premium reserve is the amount paid by the ______ in excess of the par value of the
/...............
8. A steep rise in price, followed by wide uniform fluctuations around an average price lead to
formulation of a ______.
a. Channel
b. Triangle
c. Flag
d. Wedge
9. CML stands for______.
a. Capital Market Life
b. Cost Market Line
c. Capital Market Line
d. Capital Measurement Line.
10. The security return on any day is defined as:-
a. Today’s Return = Today’s Price + Yesterday’s Price
Yesterday’s Price
b. Today’s Return = Today’s Cost?yesterday’s Cost
Yesterday’s Price
c. Today’s Return = Today’s Price + Today’s Cost
Yesterday’s Price
d. Today’s Return = Today’s Price ? yesterday’s Price
Yesterday’s Price
Examination Paper: Portfolio Management
3
IIBM Institute of Business Management
Part Two:
1. Discuss the characteristics of Stock Exchange in India.
2. Describe the Dow Theory.
3. Write a short note on Capital Market Line.
4. Mr. X has put Rs. 9000 in a five – year fixed deposit account with a bank. If the bank pays
interest at the rate of 15% per annum how much money would Mr. X receive on maturity of the
deposit?
5. Mr. Robert bought 90 shares of ICA Fertilizers Ltd. at Rs. 59 each on 1/1/2008. On 1/6/2008, the
company issued bonus shares in the ratio of 1:2. On 1/1/2010 Robert sold 35 of the bonus shares
for Rs. 78. What is the capital gain made by him ignoring indexation?
..
Case let 1
The stock market has a method in its madness. Behind the turbulence evident in the market behavior of
the last two years was the revival of the concept ‘big is beautiful’. Being ‘lean and mean’ may be the
management pundits prescription for success in the product market, but the capital market prefers ‘big’
companies and ‘big’ here refers to market capitalization. Large-cap companies are the safest bets for
appreciation in equity values.
Hindustan Lever’s market capitalization grew from a mere Rs. 9,071 crore in 1996 to Rs. 44,838 crore in
1999- a compounded annual growth rate of a little over 70 percent. This growth was achieved largely by
the market pegging the company’s share at a higher value from time to time rather than any infusion of
fresh capital by its shareholders. The collective market cap of top 50 Indian companies went up around
six times- from Rs. 27,475 crore in January, 1996 to Rs. 1,64,973 crore now, that is a compounded annual
growth of nearly 80 percent. ................
Large market cap companies have a greater ability to acquire other companies, take advantage of growth
opportunities, and protect themselves from takeover bids. On the other hand, low market cap companies
must accept lower valuations and be prepared for hostile takeover bids from larger cap companies, unless
they achieve critical mass through mergers and acquisitions.
Questions:
1. Analyze the characteristics of companies which have a small asset base and a low ratio of Market
to book Value?
2. Market capitalization of a company is a product of number of outstanding shares and the current
market price. Since the current market price (CMP) of the stock does not remain constant, is
investing for a long-term in a company looking at its present market value a good guiding
principle? Explain.
Case let 2
Whenever there is a plea for tax concessions for dedicated gilt funds, the government raises the bogey of
principles of high public finance. It is argued that concessions do not make for an optimal tax system and,
therefore, should not be provided to dedicated gilts.
Now what does one make out of this schizophrenic response of the government? The only explanation is
that, the government, to prove its sense of fair play, hates gilts which is its own instrument, and to doubly
prove the point, resorts to sell- flagellation. This sounds harsh but the action of government belies all
logic.
Questions:
1. Why is the government reluctant to provide concession or remove tax on dividends declared by
dedicated gilt funds?
2. How can dedicated gilt funds be used to develop a retail segment for government securities?
3. If dedicated gilt funds are exempted from income tax for individuals, what will be the
implications of such measures on the retail gilt market?
1. Discuss the concept of Portfolio Insurance.
2. Discuss the fundamental notions of modern portfolio theory.
3. Consider a Rs. 50 crores mutual funds floated on 1-1-2003 with a life of 8 year. The fund
estimates that its annual outflow on account of dividend, operating and management costs would
amount to Rs.15.5 crores. Suppose that the rate of interest is 16%. What is the target duration for
this mutual fund?
END OF SECTION C
1
IIBM Institute of Business Management
IIBM Institute of Business Management
Examination Paper MM.100
Portfolio Management
1. _________ is the market for issue of new securities.
a. Secondary Market
b. Consumer Market
c. Primary Market
d. Stock Market
2. Inflation is measured in terms of either wholesale price or_______.
a. Face Value
b. Retail Prices
c. MRP Value
d. Tax Value
3. _______ is basically a channel through which the savings of investors are made available to
corporations for investment.
a. Consumer Market
b. Stock Market
c. Retail Market
d. Whole sale Market
4. The share premium reserve is the amount paid by the ______ in excess of the par value of the
/...............
8. A steep rise in price, followed by wide uniform fluctuations around an average price lead to
formulation of a ______.
a. Channel
b. Triangle
c. Flag
d. Wedge
9. CML stands for______.
a. Capital Market Life
b. Cost Market Line
c. Capital Market Line
d. Capital Measurement Line.
10. The security return on any day is defined as:-
a. Today’s Return = Today’s Price + Yesterday’s Price
Yesterday’s Price
b. Today’s Return = Today’s Cost?yesterday’s Cost
Yesterday’s Price
c. Today’s Return = Today’s Price + Today’s Cost
Yesterday’s Price
d. Today’s Return = Today’s Price ? yesterday’s Price
Yesterday’s Price
Examination Paper: Portfolio Management
3
IIBM Institute of Business Management
Part Two:
1. Discuss the characteristics of Stock Exchange in India.
2. Describe the Dow Theory.
3. Write a short note on Capital Market Line.
4. Mr. X has put Rs. 9000 in a five – year fixed deposit account with a bank. If the bank pays
interest at the rate of 15% per annum how much money would Mr. X receive on maturity of the
deposit?
5. Mr. Robert bought 90 shares of ICA Fertilizers Ltd. at Rs. 59 each on 1/1/2008. On 1/6/2008, the
company issued bonus shares in the ratio of 1:2. On 1/1/2010 Robert sold 35 of the bonus shares
for Rs. 78. What is the capital gain made by him ignoring indexation?
..
Case let 1
The stock market has a method in its madness. Behind the turbulence evident in the market behavior of
the last two years was the revival of the concept ‘big is beautiful’. Being ‘lean and mean’ may be the
management pundits prescription for success in the product market, but the capital market prefers ‘big’
companies and ‘big’ here refers to market capitalization. Large-cap companies are the safest bets for
appreciation in equity values.
Hindustan Lever’s market capitalization grew from a mere Rs. 9,071 crore in 1996 to Rs. 44,838 crore in
1999- a compounded annual growth rate of a little over 70 percent. This growth was achieved largely by
the market pegging the company’s share at a higher value from time to time rather than any infusion of
fresh capital by its shareholders. The collective market cap of top 50 Indian companies went up around
six times- from Rs. 27,475 crore in January, 1996 to Rs. 1,64,973 crore now, that is a compounded annual
growth of nearly 80 percent. ................
Large market cap companies have a greater ability to acquire other companies, take advantage of growth
opportunities, and protect themselves from takeover bids. On the other hand, low market cap companies
must accept lower valuations and be prepared for hostile takeover bids from larger cap companies, unless
they achieve critical mass through mergers and acquisitions.
Questions:
1. Analyze the characteristics of companies which have a small asset base and a low ratio of Market
to book Value?
2. Market capitalization of a company is a product of number of outstanding shares and the current
market price. Since the current market price (CMP) of the stock does not remain constant, is
investing for a long-term in a company looking at its present market value a good guiding
principle? Explain.
Case let 2
Whenever there is a plea for tax concessions for dedicated gilt funds, the government raises the bogey of
principles of high public finance. It is argued that concessions do not make for an optimal tax system and,
therefore, should not be provided to dedicated gilts.
Now what does one make out of this schizophrenic response of the government? The only explanation is
that, the government, to prove its sense of fair play, hates gilts which is its own instrument, and to doubly
prove the point, resorts to sell- flagellation. This sounds harsh but the action of government belies all
logic.
Questions:
1. Why is the government reluctant to provide concession or remove tax on dividends declared by
dedicated gilt funds?
2. How can dedicated gilt funds be used to develop a retail segment for government securities?
3. If dedicated gilt funds are exempted from income tax for individuals, what will be the
implications of such measures on the retail gilt market?
1. Discuss the concept of Portfolio Insurance.
2. Discuss the fundamental notions of modern portfolio theory.
3. Consider a Rs. 50 crores mutual funds floated on 1-1-2003 with a life of 8 year. The fund
estimates that its annual outflow on account of dividend, operating and management costs would
amount to Rs.15.5 crores. Suppose that the rate of interest is 16%. What is the target duration for
this mutual fund?
END OF SECTION C
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