5 years QB SAPM

SECURITY ANALYSIS AND PORT FOLIO MANAGEMENT

QUESTION BANK (5YEARS)

2 marks

UNIT I

1. What is investment?

2. What are the steps involved in evaluation of a portfolio?

3. What are the two major types of information necessary for security analysis?

4. What are the features of preference shares?

5. What is the difference between business risk and financial risk?

6. Mention any four features which are important for choosing specific investment.

7. Distinguish between investment and speculation.

8. List down ay four sources of investment information.

UNIT II

1. What are the objectives of a capital issue?

2. What is the relationship between primary and secondary market?

3. Mention any four features of BSE.

4. What is depository?

5. What do you mean by underwriting?

6. What is demutualization of stock exchanges?

7. Define private subscription.

MBA SYED AP
5 years QB SAPM

UNIT III

1. What is bearish trend in a market?

2. What do you mean by leading indicator? Give two examples.

3. What happens in the pioneering stage of industry cycle?

4. What do you understand by fundamental approach to security analysis?

5. Define Multiplier?

6. “Interest rates affect cost of financing” – explain.

7. Explain the valuation ratios.

UNIT IV

1. Explain the differences between technical and fundamental analyses.

2. Discuss the Dow Theory.

3. Explain the three types of trends in stock process?

4. What do you infer from the moving average theory of technical analysis?

5. What are the three basic types of charts used in technical analysis?

6. What is a support and resistance level?

7. Mention the stages in industry life cycle.

8. How is technical analysis different from fundamental analysis?

UNIT V

1. What are the parameters for evaluating a portfolio?

2. List down the advantages of close ended mutual funds.

3. Define an efficient portfolio.

4. Expand CML and define its role?

5. What is an index fund?

6. What is the difference between SML and CML?

7. What criteria are involved in selection of bonds?

8. What are the motives of trade?

MBA SYED AP
5 years QB SAPM

SECURITY ANALYSIS AND PORT FOLIO MANAGEMENT

QUESTION BANK (5YEARS)

16 marks

UNIT I

1. “ There are several investment alternatives for a keen investor” – Explain

2. What are the attributes in evaluating investment avenues?

3. Describe the provisions of security contract regulation act relating to the investor protection.

4. Explain the various types of risk? And how do you calculate risk measurement?

5. Explain in detail about steps of stages in investment process.

UNIT II

1. Who are the key players involved in the new issues market?

2. What is the procedure for buying shares? Explain the stock market indices.

3. What are the money market instruments? Explain initiatives taken by SEBI to reform Indian capital market.

4. Explain the major reforms in the Indian capital market?

5. Compare and contrast institutional investment and individual investment.

6. What are the objectives and functions of SEBI? Explain the organization of SEBI?

7. Discuss the recent policy initiatives and developments in the capital market in India.

UNIT III

1. “Industry life cycle exhibits the status of the industry and gives the clue to entry and exit for investors” –
Elucidate?

2. How does ratio analysis reflect the financial health of a company?

3. Why is industry life cycle important to investors? Explain the different stages of the industry life cycle?

4. Discuss the various types of risks being covered in economic analysis.

5. Explain the factors influencing the earnings per share (EPS) of a company.

6. Discuss the factors affecting present and future values of stock. Explain the macro economic factors the need
to be analyzed.

MBA SYED AP
5 years QB SAPM

UNIT IV

1. Write short notes on: support and resistance level, Breadth of market, odd lot trading, Oscillators.

2. Explain the charts used in technical analysis.

3. Explain the bond price theorem.

4. What is fundamental analysis and technical analysis? Distinguish between the two approaches.

5. Write short notes: charting methods, moving averages and MACD.

6. Compare and contrast bar charting and point-and- figure charting.

7. Technical analysts believe that investors can use past price changes to predict future price changes. How do
they justify this belief?

8. How would you use ROC to predict the stock price movement? Kindly elucidate with an example.

9. “Chart patterns are helpful in predicting the stock price movement” comment.

10. Explain in detail the Dow Theory and how it might be used to determine the direction of the stock market.

11. Elaborately deal with the different tools of technical analysis.

12. Describe the inter linkage between the efficient market hypothesis and the mutual fund performance.

UNIT V

1. Explain the different types of risks and returns in portfolio management.

2. Deal at length with the steps in portfolio management.

3. Explain how the efficient frontier is determined using the Markowitz approach. What are the characteristics of assets
that lie on the efficient frontier? What are the strengths and weakness of the Markowitz approach?

4. What are the basic assumptions of CAPM? What are the advantages of adopting CAPM model in the portfolio
management?

5. Explain the traditional approach to portfolio construction. Explain the CAPM model.

6. What is the essential difference between the Sharpe’s and Treynor’s model of portfolio performance? Discuss in detail.

7. Discuss the Markowitz portfolio theory and the capital market theory.

MBA SYED AP
5 years QB SAPM

UNIT V

Anna University Problems

1. From the following out the required rate of return. DPS Rs 0.75 per share.

Growth rate for first 5 years - 25%

Growth rate for first 5 to 10 years – 5%

Current market price – Rs – 25/-

2. From the following find out the portfolio’s risk and return

Nature probability annual return (%)

Rs Rs

L M

1 0.2 (5) 6

2 0.4 10 (2)

3 0.3 (4) 8

4 0.1 7 (9)

L constitutes 60% of the portfolio.

3. The following data is offered on two stock:

Stock Expected return SD

P 0.15 0.30

Q 0.10 0.20

The correlation between the two stocks is +1.0

Determine the expected return and risk on the following combination of these two stocks.

% Stock P % Stock Q

a. 70 30

b. 50 50

c. 30 70

d. 10 90

MBA SYED AP
5 years QB SAPM

4. If the risk free returns is 10% and the expected returns on BSE Index is 18% risk measured by standard deviation is
5% how would you construct an efficient portfolio to produce a 16% expected returns? What would be its risk?

5. After a detailed analysis of both the aggregate stock market and the stock of RL. Company Ltd an investor has
developed the following figures:

Economic Stock Market Returns of RL Probability

Conditions returns company Ltd.stock

Good 16% 20% 0.4

Fair 12% 13% 0.4
Poor 03% -5% 0.2

The present risk free rate of return is equal to 7%. Would you recommend an investment in the stocks of RL Company
Ltd?

6. Stocks L & M have follow up returns for past two years.

Years Return %
L M
2008 12 14
2009 18 12

a. What is expected return for portfolio made up of 60% L & 40% M?

b. Find standard deviation of each stock.
c. What covariance and coefficient of correlation is between stock L & M?
d. What is portfolio risk for portfolio consisting of 60% L and 40% M?

7. Following is the information of ABC Company. Rs. In millions.

1990 1995 1998

Long term debt (11%) 12.27 9.46 11.19

Preferred stock (10%) 0.13 0.13 0.12
Common stock (par Rs.10) 0.01 0.14 12.06
Capital surplus 5.67 6.35 6.19
Retained earnings 33.93 60.31 125.2
Dividend paid 3.005 3.684 10.08

The price of share now is Rs.450. there is a rumour that the company may issue a bonus share. Investor wants to know:

a. Is there a ground for rumour?

b. Is capital structure sound?
c. Is the proper to purchase shares?
d. Advise him the P/E ratio
e. Prepare common size statement.

MBA SYED AP
5 years QB SAPM

8. The following three portfolios provide the particulars given below.

Portfolio average annual return standard deviation correlation co-efficient

A 18 27 0.8

B 14 18 0.6

C 15 08 0.9

Market 13 12 ----

Risk free rate of interests 9%

 Rank these portfolios Suring Sharpe’s and Treynor’s methods.

 Compare both the indices.

9. Suppose you are to analyse two portfolios having the following characteristics:

Observed Return Beta Residual Variance

Portfolio A 0.18 2.0 0.03

Portfolio B 0.12 1.5 0.00

The risk free rate is 0.07. The return on the market portfolio is 0.15. The standard deviation of the market is 0.06.

I. Compute the Jensen Index for Portfolio A & B

II. Compute the Sharpe Index for market portfolios

III. Compute the Sharpe Index for portfolios A & B

IV. Compute the Treynor index for the portfolio A & B.

MBA SYED AP