Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis – I - Question Paper

You are needed to compute the proportion of fund to be invested in the 10-year zero-coupon bonds and also the face value to be purchased by Mr. Prashant for the identical. (Assume that the zero-coupon bonds can be purchased for the theoretical price and the face value is Rs.100).

(7 marks) < ans >





END OF part B



part C : Applied Theory (20 Marks)

· This part consists of ques. with serial number seven - 8.

· ans all ques..

· Marks are indicated against every ques..

· Do not spend more than 25 -30 minutes on part C.

7. You are provided the historical betas and their associated returns of the stocks. You are expected to identify whether these stocks have provided returns, which are commensurate with their respective betas. Which technique will you employ? Also state the applications for this technique.

(10 marks) < ans >

8. A number of trading rules exist and every 1 has to be interpreted differently. Though a majority of tech. analysts keep track of option rules and decide on a buy or sell decision based on a consensus of the signals, a complete agreement of all the rules is not common. With respect to this, explain different techniques of trading rules.

(10 marks) < ans >



END OF part C



END OF ques. PAPER






Suggested Answers
Security Analysis – I (211): April 2006

part A: Basic Concepts

1.
Answer: (d)

Reason: All statements are accurate other than choice (d). The RBI handles payment of interest on these securities.

Therefore, choice (d) is the accurate ans.
< TOP >

2.
ans : (b)

cause : For a portfolio consisting of 2 securities:



Given: w1 = w2 = 0.50 (equal proportions)

s1 = 0 (risk-free security)

\ = 0 + (0.5)2 + 0 = (0.5s2)2

\s p = Standard deviation of portfolio =

= Half the standard deviation of the risky security.

Therefore, choice (b) is the accurate ans.
< TOP >

3.
ans : (b)

cause : Capital gain yield from an equity share =

= .

Therefore, choice (b) is the accurate ans.
< TOP >

4.
Answer: (c)

Earning:   Approval pending.