Fundamentals of Investment(Major/Minor) — DU B.A.(Prog.) with Commerce (Accounting and Finance) Previous Year Question Papers

Type of the Paper : DSC 5. Mathematical tables will be provided to you in the Examination Hall. a) Define the term Investment? How is it different from Speculation? b) Following information is available in respect of the rate of return on two securities A and B: Condition Probabilitv Rate of Return on Security A Rate of return on Security B Find out expected return on both the securities. Find out expected risk on both the securities. Which security should be selected by a risk averse investor and why? OR c) What is the difference between Direct Investing and Indirect Investing? d) What is secondary market? What are its firnctions? How are securities traded at a stock exchange? a) What is yield to maturity (YTM)? How is it computed? Illustrate with the 6 investors? State the process of credit rating. OR c) What is a bond? Explain the features of a bond. d) A bond having face value ofRs.1000 having coupon rate of interest of 14% p.a. is available in the market at a price of Rs. 900. The bond is redeemable at par after l0 years. lnterest is payable annually. i) Find Intrinsic value of the bond if investor,s required rate of return is l6%. ii) What will be the change in value of this bond if interest is payable semi-annually? a) 'Write short notes on: 6 i) Three levels of market efficiency iD Line chart and Bar Chart b) Explain Economy-Industry-Company (EIC) framework of equity analysis. 12 What are advantages and limitations of using this framework? OR c) What do you mean by technical analysis? How technical analysis is 6 different from fundamental analysis? d) X Ltd. is expected to pay a dividend of Rs. 8 per share next year. The face 12 value of the share is Rs. 100. The dividend is expected to grow at l}yop.a. i) What is intrinsic value of the share if required rate of return is l2%? ii) What will tbe change in value if required rate of retum is 15%? iii) If required rate of return is l5%, what is expected price of the share after 2 yeas? iv) Give formula for finding intrinsic value if there is no gowth in dividends of the company (zero growth model). a) What is diversification in portfolio theory? State the process of portfolio 6 construction and management. b) Mr. John wants to construct a portfolio using securities A and B. The 12 following information is available about these two securities: Security A Security B Expected retum 20% rs% Standard deviation 1s% 8% Mr. John wants to invest 70% of his funds in security A and 30 % in security B. Compute: i) Expected retum of his portlolio ii) Risk of his portfolio assuming correlation coefficient between return on these two securities is + I iii) Risk of his portfolio assuming correlation coefficient between retum on these two securities is -l iv) Risk of his portfolio assuming covariance betu,een retum on these two securities is 120 OR c) How portfolio risk is calculated? What is importance of correlation 6 coefficient in calculation of portfolio risk?