Investment Analysis and Portfolio Management — DU Bachelor of Business Administration (Financial Investment Analysis) Previous Year Question Papers

Calculate Net Asset Value (NAV) per unit. An investor invests Rs. 2,00,000 in a mutual fund scheme with: Entry load = 1.5% Exit load = 1 % NAV at purchase = Rs. 25 NAV at redemption = Calculate amount received on redemption. Portfolio allocation decision: An investor wants to create a portfolio consisting of a risk-free asset and a market portfolio. The expected return on market portfolio is 14% and risk-free rate is 6%. If the investor desires a portfolio return of 11%, determine : (i) Proportion invested in risk-free asset (ii) Proportion invested in market portfolio. (b) Explain Capital Asset Pricing Model and differentiate between Capital Market Line and Security Market Line. (6) AND PORTFOLIO 6. Working notes form part of the answer. 1. (a) An investor purchased a share for Rs. 480. During the year, the investor received dividend of Rs. 20 and sold the share for Rs. 540 after holding it for 8 months. To evaluate performance consistency, the investor also reviews the past 5-year return pattern of a similar security given below: 6. (a) An investor is analysing different investment opportunities including equities, mutual funds, and market-linked portfolios in order to evaluate risk-return trade-offs and make optimal allocation decisions. Year Return (%) Calculate the following measures of return: (i) Holding Period Return (ii) Annualized Return (iii) Arithmetic mean return (iv) Geometric mean return (12) (b) Explain the components of required rate of return. Distinguish between investment and speculation. (6) Market-based securities: Risk free rate = 7% Expected market return = 15% Calculate expected return using CAPM for securities having : Identify which security is more sensitive to market movements. A portfolio has return of 20% and standard deviation of 25%. Risk free rate is 8%. Calculate Sharpe ratio. Mutual fund investment: Market value of investments = Rs. 80 crore Liabilities = Rs. 5 crore Number of units outstanding = 5 crore (iii) Covariance between returns of X and Y (iv) Correlation coefficient between X and Y (b) State significance, assumptions & limitations of Markowitz diversification. (6) 5. (a) The probability distribution of returns of two securities P and Q is given below : Economic Probability Return on Return on (i) Expected return of both securities (ii) Standard deviation of both securities (iii) Coefficient of variation of both securities (iv) Which security is preferable on the basis of risk per unit of return? (12) (b) Explain the investor life cycle approach and how asset allocation changes over different stages of life. Distinguish between active portfolio management and passive portfolio management strategies. (6) 2. (a) An investor is evaluating two debt instruments to assess their return characteristics under different interest structures. A bond with face value Rs. 1,000 carries a coupon rate of 9% payable annually and matures after 6 years. The bond is currently selling for Rs. 950.