SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT-KANNUR UNIVERSITY

     III Semester M.B.A Degree (Regular) Examination,January 2016
                                             (2014 Admn)
                              Elective-II :FINANCE
MBA 3E09 :Security Analysis and Portfolio Management


                                 SECTION-A
Answer any two questions in this Section. Each question carries 13 marks :

1.Elucidate the functions of an organised security market.
                                      OR
  A prospective investor is evaluating the shares of Ashoka Company. He is two
   scenarios. Under the first scenario the dividend of the company will grow at an
  annual rate of 6 percent in perpetuity. Under the second scenario the dividend
  will grow at 12 percent per annum for the first three years and for the next three
  years it will grow at the rate of  7 percent per annum. Thereafter it will grow at a
  constant rate of  4 percent in perpetuity. The last year's dividend per share is
  Rs.3 and the current market price per share is Rs.80.If the investor's required
  rate of return is 10 percent, calculate the value of the share under each of the
 assumptions. Should the share be purchased ?
2. Explain the duties and responsibilities of SEBI.
                                      OR
From the following data, find out the portfolios that are well diversified using
Sharpe's and Treynor's ratios :

Portfolio           Return (%)               Standard Deviation (%)         Beta
A                        16.60                              24.70                           1.24
B                         15.15                              20.25                           0.96
C                         09.40                              15.70                           0.82
D                         21.25                              16.40                           1.13
E                          18.30                              18.20                           1.02

The risk free return is 7 percent.Offer your comment on the portfolios
                                         SECTION-B
Answer any six questions in the section Each question carries 9 marks (1 mark
for part (a),3 marks for part (b) and 5 marks for part (c) :
3.  a)What do you mean by portfolio ?
     b) Explain the stages of portfolio evaluation.
     c) Compare the following two portfolios on the basis of sharpe Ratio and
        Treynor's ratio and offer your comment. Risk free rate of return is 8 percent :
    Portfolio                 Return from the            Standard Deviation                Beta  
                                      portfolio                           (%)       

        A                            10%                               13                                    0.75
     
        B                             20%                               26                                   1.45

 Market Portfolio              14%                              18                                    1.00

4.  a) What is diversification ?
     b) Explain the advantages of  diversification.
     c) Use sharpe's single index modal to select the best combination of securities
         for a portfolio. The risk free rate is 5 percent and the market standard deviation
        is 20 percent :

Security                 S1                  S2              S3              S4                 S5

Risk (Beta)              1.5               1.2               1.3            1.4                  0.85

Return (%)               12                15                 10            16                   8

Error (%)                  20                15               12             24                   22

5.  a) What is technical analysis ?
     b)  Explain the logic behind technical analysis.
     c)  Explain Dow Theory.
6.  a)  What is ratio analysis ?
     b)  Explain liquidity ratios.
     c)  Explain the uses of ratio analysis.
7.  a)  What is portfolio risk ?
     b)  Explain Capital Asset Pricing Model.
     c)  Explain the assumptions of CAPM.
8.  a)  Define put option.
     b)  Distinguish between call option and put option.
     c)  Explain the pay-off of a put option buyer with an example.
9.  a)  What is OTCEI  ?
     b) Explain the advantages of OTCEI.
     c)  Explain the measures required to improve the turnover of OTCEI.        















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