Security Analysis and Portfolio Management
1St Internal Assessment Test
Duration: 90 Minutes
Maximum Marks 30
Answer any THREE Questions
1. Explain the various investment avenues and their features.
2. Stock R and S display the following returns over the past two years:
Year
Stock R Return (%) Stock S Return (%)
19X3 10
12
19X4 16
18
a. What is the expected return and risk on a portfolio made up of 40% R and 60% S?
b. What is the standard deviation of each stock?
c. What is the covariance of stocks R and S?
d. Determine the correlation coefficient of stocks R and S.
e. Consider a third security T, along with Stocks R and S. Its return over the past two
years was 19X3, 16%; 19X4, 10%. Would this security provide any advantages in
combination with stock R? With Sock S? With Stocks S together?
3. Ms. S wants to earn by writing call option on M Corporations stock. The current
price of the stock is Rs. 28 and Mr. S wants to write a 4 month call option with the
striking price Rs. 30. Mr. S wants to determine the appropriate premium to charge for
the call option. The stocks standard deviation is Rs. 3. The riskless rate is assumed to
be 10%. Determine the premium value using B-S model.
4. What are financial derivatives? Elaborate different types of derivatives.
Diagrammatically explain the pay-offs of a call buyer and writer.
5. What is meant by fundamental analysis? Explain various factors of fundamental
analysis.
Security Analysis and Portfolio Management
1St Internal Assessment Test
Duration: 90 Minutes
Maximum Marks 30
Answer any THREE Questions
1. Explain the various investment avenues and their features.
2. Stock R and S display the following returns over the past two years:
Year
Stock R Return (%) Stock S Return (%)
19X3 10
12
19X4 16
18
a. What is the expected return and risk on a portfolio made up of 40% R and 60% S?
b. What is the standard deviation of each stock?
c. What is the covariance of stocks R and S?
d. Determine the correlation coefficient of stocks R and S.
e. Consider a third security T, along with Stocks R and S. Its return over the past two
years was 19X3, 16%; 19X4, 10%. Would this security provide any advantages in
combination with stock R? With Sock S? With Stocks S together?
3. Ms. S wants to earn by writing call option on M Corporations stock. The current
price of the stock is Rs. 28 and Mr. S wants to write a 4 month call option with the
striking price Rs. 30. Mr. S wants to determine the appropriate premium to charge for
the call option. The stocks standard deviation is Rs. 3. The riskless rate is assumed to
be 10%. Determine the premium value using B-S model.
4. What are financial derivatives? Elaborate different types of derivatives.
Diagrammatically explain the pay-offs of a call buyer and writer.
5. What is meant by fundamental analysis? Explain various factors of fundamental
analysis.
