JAYA ENGINEERING COLLEGE

Thiruninravur-602024

Question Bank
Department : Department of Management Studies Subject Code : BA4001
Year/ Sem : II/ 03 Subject : Security Analysis & Portfolio Management
Regulation : 2021 Staff Incharge: Sweetlin Jenisha. E, Asst Prof-MBA

UNIT I INVESTMENT SETTING 9

Financial and economic meaning of Investment – Characteristics and objectives of Investment –
Investment process -Types of Investment – Investment alternatives – Choice and Evaluation – Risk
and return concepts - Valuation of bonds and stock.

PART A (2 marks)
1 Define Investment.
2 Differentiate Investor and Speculator.
3 Identify the two types of information necessary for security analysis.
4 Classify the different kinds of bonds.
5 Give five characteristics of common stock.
6 Can you assess the importance of warrants?
7 What are the features of preference shares?
8 Distinguish between Investment and Gambling.
9 Identify the features of warrants.
10 State about Investment in the Finance point of view.
11 Give five qualities required for successful investing.
12 Interpret the objectives of Investment.
13 Define security as per Security Contract Regulation Act.
14 Summarize the concept of Risk and Return.
15 How do you show your understanding on speculation?
16 Classify the types of risk.
17 What is risk free rate of return?
18 Compare financial risk and business risk.
19 Define systematic risk and unsystematic risk.
20 Why do investors invest in Gold, Silver and Real estate?
21 Identify the features of warrants.
22 State about Investment in the Finance point of view.
23 Give five qualities required for successful investing.
24 Interpret the objectives of Investment.
25 Define security as per Security Contract Regulation Act.

PART B (13 marks)

1 Define the Economic and Financial meaning of Investment.
2 Explain the various choices of Investment alternatives available for an Investor with moderate
risk taking capabilities
3 Identify the different investment alternatives in India.
4 i)“Adequate information is required for the investor to carry out his investment programme”-
Comment.
5 i) Discuss the various features of mutual funds.
ii) Calculate the yield to maturity of the bond.
6 What are the objectives of investors in investing their funds in the stock market?
7 Discuss the various mutual fund schemes available for investors.
 8 Elucidate about trade-off concept between risk and return in Investments.
9 Differentiate between fundamental and technical analysis.
10 What do you know about the basics of fundamental analysis?
11 Explain the efficient market theory/ efficient market hypothesis with diagrammatic explanation.
12 List out the various types of marketable financial Assets?
13 Explain risk/ return trade off with diagrammatic illustration.
14 What are the objectives of Investment – Explain?
15 Explain the valuation of stocks.

PART C (15 marks)

1
Assume that there is market information stating that the market is heading towards the boom
period. Will you buy a common stock based upon this information?
2 R.S Vermais considering investing in a bond currently selling [Link] bond has
four years to maturity, a Rs.10,000 face value and a 8% Coupon rate. The next annual interest
payment is due one year from today. The approximate discount factor for investments of simi-
lar risk is 10%.
i) Calculate the intrinsic value of the bond. Based on this calculation, should Verma
purchase the bond.(8marks)
ii) Calculate the YTM of the bond. Based on this calculation, should Verma purchase The
bond.(7marks)
3 A mutual fund has earned an average annual return of 24 percent over a five year period while
the average market return over the same period was only 18 percent. The risk free rate prevail-
ing at the time was 7.5 percent. The mutual fund had a beta of 1.45. The standard deviation of
return of the mutual fund and the market index were 40 percent and 30 per cent respectively.
Calculate Fama‟s net selectivity for the fund, showing the decomposition of performance
4 What are the investment alternatives?
5 Explain the alternatives of investment.
6 Explain the valuation of Bonds.
7 Explain Economic forecasting under economic analysis.
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UNIT II FUNDAMENTAL ANALYSIS 9

Economic Analysis – Economic forecasting and stock Investment Decisions – Forecasting techniques.
Industry Analysis : Industry classification, Industry life cycle – Company Analysis Measuring
Earnings – Forecasting Earnings – Applied Valuation Techniques – Graham and Dodd’s investor
ratios.
PART A (2 marks)
1 What is Book building and IPO?
2 Explain reverse book building.
3 Identify the different types of security markets.
4 Analyse the meaning of underwriting.
5 What is your opinion about primary market?
6 Interpret the role of Capital Market.
7 Identify the importance of IPO grading.
8 Explain the meaning of over subscription.
9 What are the facts considered in selecting OTCEI?
10 Analyse the parties involved in issue of shares in stock market.
11 What is the rolling settlement in trading of securities?
12 Interpret about trading on margin.
13 Who are the participants in financial market?
14 Distinguish between capital market and money market.
15 Identify objectives of OTCEI.
16 Compare BSE and NSE.
17 What is insider trading?
18 Explain about odd lot trading.
19 Name any four market indices in Indian stock market.
20 List the functions of SEBI.
21 What are the facts considered in selecting OTCEI?
22 Analyse the parties involved in issue of shares in stock market.
23 What is the rolling settlement in trading of securities?
24 Interpret about trading on margin.
25 Who are the participants in financial market?

PART B (13 marks)

1 Explain the Role of SEBI in primary and secondary market.
2 Explain the characteristics of Book Building and its process.
3 Describe functions of NSDL.
4 Identify the various ways in which an initial public offer can be made?
5 The strength of the economy depends upon the capital market-Discuss.
6 What are the basics of technical analysis?
7 Differentiate between fundamental and technical analysis.
8 What do you know about the basics of fundamental analysis?
9 Tell about stock investment decisions (SID).
10 What is fundamental analysis and objectives of fundamental analysis?
11 Explain in detail about the industry classification.
12 Explain in detail about the Graham and Dodd’s investor ratios.
13 Explain the ways to sound investment decisions.
14 Explain the Company Analysis Measuring Earnings.
15 Elaborate about the Initial Public Offering.

PART C (15 marks)

1 Discuss the recent policy initiatives and developments in the Capital market in India.
2
Elucidate on the objectives, functions and powers of SEBI?
3 Comment on the role played by the key players involved in the new issue market.
4 What are the G&D’s 3 principles of investment?
5 Explain in detail about the Graham and Dodd’s investor ratios.
6 What are the applied valuation techniques or tools used in company analysis?
7 Elucidate on the objectives, functions and powers of SID.
__________________________________________________________________________________
UNIT III TECHNICAL ANALYSIS 9
Fundamental Analysis Vs Technical Analysis -- Dow theory – Charting methods - Chart Patterns
Trend – Trend reversals – Market Indicators -Moving Average – Exponential moving Average
Oscillators -RSI -ROC - MACD.
Efficient Market theory - Forms of market efficiency -weak, semi-strong, strong form - Empirical
tests of market efficiency -its application.
 PART A (2 marks)
1 What do you mean by Fundamental Analysis?
2 What are leading indicators of the economy? Give few examples.
3 What do you understand by EIC framework in security analysis?
4 Analyse how Economic Forecasting is done?
5 Discuss the meaning of Economic analysis.
6 Interpret the industry lifecycle stages.
7 What is the importance of P/E ratio?
8 What is Value vs. Growth investing?
9 Identify the features of opportunistic building model.
10 Analyse the major ratios involved in Fundamental analysis.
11 Discuss the significance of ROI in company analysis.
12 Interpret the concept of company analysis.
13 What do you mean by lagging indicators of the economy? Give two Examples.
14 List the Criticisms for Fundamental Analysis.
15 Identify the characteristics of coincidental and lagging indicators of the economy. Give two
Examples.
16 Classify industry according to business cycle.
17 What is SWOT analysis?
18 Explain the use of ratio analysis.
19 What is meant by fundamental analysis?
20 What is intrinsic value of a share?
21 Analyse how Economic Forecasting is done?
22 Discuss the meaning of Economic analysis.
23 Interpret the industry life cycle stages.
24 What is the importance of P/E ratio?
25 What is Value vs. Growth investing?

PART B (13 marks)

1 i)Define ROI.
ii)What are the methods of computation of ROI in company analysis?
2 Explain two commonly used ways of decomposing ROE in to its underlying determinant.
3 i)Identify the need for company analysis.
ii)Discuss the key tools used in Company analysis.
4 What is SWOT analysis?
5 What is meant by fundamental analysis
6 Explain the Japanese candle stick.
7 Explain bar charts.
8 Explain RSI, ROC & MACD market indicators.
9 Explain the empirical tests of market efficiency and its application.
10 Draw and explain the point and figure charts.
11 Calculate operating leverage, Financial leverage and combined leverage:
A) 1,00,000 units B) 1,40,000 units
Sales rs.10 rs.10
Variable cost rs.6 rs.6
Fixed cost rs.3,00,000 each
Interest 10% on debentures
Tax 40%
12 Explain Elliot Wave Theory.
13 Explain moving average analysis.
14 Give a detailed explanation about oscillators.
15 What do you mean by measuring earnings?

PART C (15 marks)

1 i) As an analyst, discuss the concept of an industry life cycle by describing its four phases.
In which phase of the life cycle, investments in an industry are most attractive? (12marks)
ii) Why is industry life cycle important to investors? (3marks)
2 Foreign investors look for certain key factors before investing in Indian Economy. Elabo-
rate.
3 Enumerate the significance of economic forecasting in fundamental analysis.
4 Explain the Dow theory.
5 Draw and explain the point and figure charts.
6 Explain the whole concept of risk and return.
7 Explain weak, strong and semi strong form of Efficient Market Hypothesis.
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UNIT IV PORTFOLIO CONSTRUCTION AND SELECTION 9

Portfolio analysis - Reduction of portfolio risk through diversification – Portfolio risk - Portfolio
Selection - Feasible set of portfolios - Efficient set - Markowitz model - Single index model -
Construction of optimum portfolio - Multi-index model.

PART A (2 marks)
1 What are the three types of trends in stock prices?
.
2 Explain the importance of Oscillators in technical analysis.
.
3 Differentiate fundamental analysis from technical analysis.
.
4 Analyse the usage of moving average method in technical analysis.
.
5 What is the theme of Technical analysis?
.
6 Draw and Interpret a Line Chart.
.
7 Define RSI and its usage.
.
8 Explain MAC.
.
9 Compare ROCI and ROCII.
.
10. Analyse the two major market indicators considered as a barometer of Indian capi-
tal market.
11. How do the leverage policies affect a company’s performance?
12. What do you mean by security market line? Define “Efficient frontier”.
13. What is Random Walk Hypothesis? What are the various levels of market Efficiency?
14. Explain trend reversal.
15. How will you identify support level of a stock?
16. Analyse any two oscillators.
17. What are Oscillators?
18. What is resistance level of a stock?
19. What do you mean by short sale?
20. What are the various forms of EMH?
21. Analyse the usage of moving average method in technical analysis.
22. What is the theme of Technical analysis?
23 Draw and Interpret a Line Chart.
24. Define RSI and its usage.
25. Explain MAC.

PART B (13 marks)

1 i) What are the premises of technical analysis?
ii)What are the differences between Technical and fundamental analysis?
2 „Chart patterns are helpful in predicting the stock price movement‟-Comment.
3 i)How would you use ROC to predict the stock price movement?
ii)Compute and differentiate ROCI from ROC II.
4 Analyse the weak form of the efficient market hypothesis. Describe the empirical tests
used for testing the weak form efficiency.
5 Moving average not only smoothens the data, but also predicts the market–Discuss with an
example.
6 Explain the multi index model.
7 Explain the single index model.
8 How do you select a portfolio?
9 What do you mean by markowitz model?
10 What do you mean by construction of optimum portfolio?
11 What do you know about Efficient market theory – Comment?
12 Explain the Portfolio Construction And Selection.
13 Explain the role of diversification in eliminating the portfolio risk.
14 Explain the trade-off between liquidity and expected returns.
15 Explain the capital allocation choice across risky and risk-free portfolios.

PART C (15 marks)

1 Discuss the empirical evidences of the strong form and weak form of market efficiency.
2 How does technical analysis differ from fundamental analysis? Explain the ways in which the
technicians think before they act?
3 What are the statistical tools used to measure the risk of the securities? Explain.
4 Find out the variance and standard deviation for company A and X.
company A
Return(ri) Probability(pi)Weighted
Average Return(ri*pi)
8 0.15 1.20
9 0.18 1.70
10 0.30 3.00
11 0.25 4.00
12 0.15 1.50
Total 1.03 e(r)=11.4
 5 Explain the reduction of portfolio risk through diversification.
6 Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $50,000
or $150,000 with equal probabilities of .5. The alternative risk-free investment in T-bills pays 5 percent
per year.
a. If you require a risk premium of 10 percent, how much will you be willing to pay for the portfolio?
b. Suppose that the portfolio can be purchased for the amount you found in. What will be the expected
rate of return on the portfolio?
c. Now, suppose that you require a risk premium of 15 percent. What is the price that you will be will-
ing to pay?
d. Comparing your answers to (a) and (c), what do you conclude about the relationship between the re -
quired risk premium on a portfolio and the price at which the portfolio will sell?
7 Why it is said IPOs are underpriced compared to the price at which they could be marketed?

UNIT V PORTFOLIO MANAGEMENT 9

Capital Asset Pricing model - Lending and borrowing - CML - SML - Pricing with CAPM - Arbitrage
pricing theory–Portfolio Evaluation - Sharpe's index Treynor's index, Jensen's index – Mutual Funds–
Portfolio Revision.
PART A (2 marks)
1 What is CAPM?
2 Explain the criteria for evaluation of portfolio.
3 What is an index fund?
4 Distinguish between SML and CML.
5 Discuss how is Beta computed using CAPM?
6 Interpret the term AMC.
7 What do you mean by diversification?
8 How would you summarize portfolio selection?
9 Compare entry and exit load in mutual fund.
10 Analyse the term Jensen measure.
11 What is your opinion on portfolio management?
12 Interpret the term NAV.
13 What are formula plans?
14 State the importance of mutual funds.
15 Compare open ended and closed ended funds
16 What are mutual funds?
17 What is Treynor‟s index?
18 Can you explain about passive management?
19 What is portfolio revision?
20 How would you explain the importance of gilt edged fund?
21 Explain the criteria for evaluation of portfolio.
22 What is an index fund?
23 Distinguish between SML and CML.
24 Discuss how is Beta computed using CAPM?
25 Interpret the term AMC.

PART B (13 marks)

1 How will you explain the process of portfolio analysis?
2 “Mutual funds are best form of investments”-Discuss.
3 Give a detailed account on the Markowitz‟s risk diversification.
4 Analyse with example the patterns of portfolio revision.
5 Trace growth of mutual funds in India. What is the need to regulate different types of mutual-
funds in India?
6 What are the applicable sets of portfolios?
7 How can you construction a potential portfolio?
8 What do you mean by Capital Asset Pricing model?
9 Explore the various methods through which portfolio evaluation could be done.
10 What do you mean by Arbitrage Pricing Theory?
11 What do you mean by Portfolio Revision?
12 Elaborate about the Jensen’s Index.
13 What do you mean by CML and SML.
14 Explain Lending in CAPM.
15 Evaluate the advantages and disadvantages of Sharpe’s Index.

PART C (15 marks)

1
The following three portfolios provide the particulars given below:
Average -
Standard Correlation
Portfolio annual
deviation co-efficient
return
A 18 27 0.8
B 14 18 0.6
C 15 8 0.9

Market 13 12
-Risk free rate of interest 9%.
(i) Rank these portfolio using Sharpe's and Treynor's methods. Compare both the indices.
2 The following information is provided regarding the performance of the
fund namely Birla advantage, Sundaram growth and F&C value for a period
of a six months ending August 2019. The risk free rate of interest is assumed
to be 9%. Rank them with the Sharpe index and discuss.
Standard
Scheme deviation Beta
Rp
Birla 25.38 4 0.23
Advantage
Sundaram 25.11 9.01 0.56
Growth
Sun F&C 25.01 3.55 0.59
value
3 i) Explain how the efficient frontier is determined using the Markowitz approach.
(4marks)
ii) What are the characteristics of assets that lie on the efficient frontier? (8marks)
What are the strength and weakness of the Markowitz approach? (3marks)
4 Explain CAPM in detail.
5 Briefly explain the portfolio risks.
6 Explain Lending and borrowing.
7 What do you mean by Portfolio Evaluation?
STAFF INCHARGE HOD