AIMA (All India
Management Association)
JUNE 2015
EXAMINATION
FM 03 / eFM 03
SECURITY ANALYSIS
AND PORTFOLIO MANAGEMENT
Time: Three Hours Maximum Marks: 100
Note:
1. The paper is divided in three sections: SECTION-A,
SECTION-B and SECTION-C.
2. There are seven questions in SECTION-A. Students are required to attempt ANY FOUR.
3. SECTION-B has five questions, attempt ANY THREE.
4. All the questions of SECTION-C (Case Study) are
compulsory.
SECTION-A (10 Marks
each)
1.
State the economic and financial meaning of
investment. What are the risks
associated with investment in stock market?
2.
What is SML?
How is SML different from CML?
3.
Explain in details fundamental analysis. How is fundamental analysis different from
technical analysis?
4.
What do you understand by EMH? Distinguish between the three levels of
market efficiency.
5.
Name the different types of Mutual Fund Schemes
available. What are advantages and disadvantage
of investing through mutual funds?
6.
Distinguish between primary and secondary
market. What are the major roles of
stock market regulator for these markets?
7.
Explain multifactor model of portfolio. Which are the major factors in the model?
SECTION-B (15 Marks
each)
8. The mean return,
standard deviation and beta of mutual fund scheme are 13%, 17%
and 1.2 respectively. Risk free
return during this time period was 5%.
Calculate the Treynor measure,
Sharpe measure and Jensen measure. What
inferences do you draw from these measures?
9. From the following
information available calculate:
Stock A Stock B
Expected returns 14% 20%
Standard deviation 25% 40%
Coefficient of Correlation of Stock A, B = 0.40
a) the Co-variance between Stock A and B.
b) the expected returns and risk of a portfolio in which A
and B are equally weighted.
10. The following information is available:
Expected return for the market = 14%
Standard deviation of the market return = 20%
Risk-free return = 6%
Correlation coefficient between stock X and the market = 0.7
Correlation coefficient between stock Y and the market = 0.8
Standard deviation of stock X = 24%
Standard deviation of stock Y = 32%
You are required to:
a) Calculate the beta for stock X and stock Y
b) Calculate the required rate of return for each stock.
11. Explain various investment alternatives available for an
Indian investor. Which of these alternatives
are eligible for saving taxes?
12. What do you understand by efficient frontier? Explain Markowitz portfolio theory.
SECTION-C (15
Marks)
Case Study
(Compulsory)
The current dividend on equity shares of the Shopkart Ltd,
an online shopping firm is Rs. 5. In
view of boom in e-commerce business Shopkart is expected to enjoy an above
normal growth rate of 40% for 5 years.
Thereafter the growth rate will fall and stabilize at 15%. Equity investors require a return of 20% from
Shopkart’s stock.
13. Case
Question:
What is
the intrinsic value of the equity shares of Shopkart?
