Hall Ticket No Question Paper Code: CMB404
INSTITUTE OF AERONAUTICAL ENGINEERING
(Autonomous)
MBA III Semester End Examinations (Regular) January, 2018
Regulation: IARE-R16
Security Analysis And Portfolio Management
(MASTER OF BUSINESS MANAGEMENT)
Time: 3 Hours Max Marks: 70
Answer ONE Question from each Unit
All Questions Carry Equal Marks
All parts of the question must be answered in one place only
UNIT I
1. Explain the forms of efficient market hypothesis.
What is stock market? Write the functions of stock exchange.
2. Write a brief note on National Stock Exchange and Bombay Stock Exchange.
Explain the different investment avenues.
UNIT II
3. Write the assumptions of CAPM Model.
Mr. Suresh is considering the purchase of two stocks X and Y for the next year. The returns of
the securities depend on the next year's state of the market. The estimated rates of return are
shown in the Table 1.
Table 1
State of the market Probability of occurrence Return of X Return of Y
recession 0.30 12% 10%
average 0.40 14% 12%
boom 0.30 16% 18%
i. Find out the Individual Return and Risk
ii. Find out the Portfolio Return by considering equal proportion
iii. Find out the Co variances and correlation
iv. Find out the portfolio Risk by considering equal proportion
4. Explain the arbitrage pricing theory.
Estimate the stock return by using the arbitrage model. The expected return of the market is
18% and the equity's beta is 1.5. The risk free rate of interest is and market risk and sensitivity
index is given in Table 2.
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Table 2
security market risk sensitivity index
inflation 1.2
ndustrial production 0.95
risk premium 1.1
interest rate 0.8
UNIT III
5. Explain the risks involved with bonds.
Explain the different bond theories with example.
6. Mention the types of bonds. Explain in detail.
i. Determine the price of Rs.1000 zero coupon bond with yield to maturity of 20% and 8 years
to maturity.
ii. What is the YTM of this bond if its price is Rs.250.
UNIT IV
7. Write the differences between futures and option contracts.
Design a SWAP diagram from the Table 3 shown below.
Table 3
company fixed interest rate floating interest rate
A 10% LI+.2
B 11.2% LI+.6
8. Explain the types of derivatives.
Explain the steps to design interest rate SWAP.
UNIT V
9. Write the advantages of mutual funds.
The Table 4 is provided regarding the performance of the funds namely ICICI, BIRLA and
FRANKLIN for a period of one-year. The risk free rate of interest is 10%. Rank them with the
help of Sharpe's and Treynor's index.
Table 4
funds Rp SD Beta
ICICI 27 5 0.56
BIRLA 25 8 0.74
FRANKLIN 23 3.5 0.89
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10. Explain the concept of net asset value.
Franklin fund, T-bill and NSE nifty have the following returns over past 5 years given in Table
5. What is the predictive ability of the fund?
Table 5
Year Franklin fund T-bill NSE nifty
1 9 6 6
2 10
3 14 8 11
4 12 7 10
5 16 9 13
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