University of Delhi 2010-3rd Year B.Com (HONS) FUNDAMENTALS OF INVESTMENT UNIVERSITY - Question Paper
FUNDAMENTALS OF INVESTMENT PAPER
This question paper contains 16 printed pages]
Your Roll No
6024
B.Com. (Hons.)/III J
Elective Group EAFinanceI Paper XX Fundamentals of Investment (Admissions of 2004 and onwards)
Time 3 Hours . Maximum Marks * 75
TFT*? : |3 J|fch : 75
(Write your RoU No on the top immediately on receipt of thi!> question paper )
TdHsJlJ 0
Note The maximum marks printed on the question paper
I
are applicable for the candidates registered with the School of Open Learning for the B Com (Hons) These marks will, however, be scaled down proportionately m respect of the students of regular colleges, at the time of posting of awards for compilation of result
Note Answers may be written either in English or in Hindi, but the same medium should be used throughout the paper
1
|
Attempt All the questions
(a) What is depository system 9 How is depository system useful for investors 9 6
(6) The rate of return of securities of ABC Ltd and XYZ Ltd in different market conditions is as follows
|
Market |
Probability |
Rate of Return | |
|
Condition |
ABC Ltd. |
XYZ Ltd | |
|
Bearish |
30 |
15% |
20% |
|
Normal |
30 |
20% |
30% |
|
Bullish |
40 |
30% |
40% |
Find out the expected return and risk (cr) for the securities of two companies. If an investor invests Rs 3,00,000 in ABC Ltd and Rs 2,00,000 m XYZ Ltd , what will be the expected return of the investor 9 9
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I |
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i |
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15% |
20% |
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30 |
20% |
30% | |
|
40 |
30% |
40% | |
q.'.Tft. feftk 3 3,00,000 7. Mfw TT t 3 fcrlfM 2,00,000
TcTT t, cR fnlch TrrfTRT yfdd RT #TT ?
P.TO
Or
(a) Compare the following investments m terms of return, risk, liquidity and tax shelter 6
(i) Equity Bhares
() Non-convertible debentures
(m) Residential house
(w) Gold
(b) Mr Gupta makes an investment at Rs 50 The year end price of this investment under different market conditions with equal probabilities as follows
Condition Year end Price
(Rs)
Bullish 75
Normal 60
(ii) Find out the expected value of return for one year period and risk (a) of the return
(u) Also calculate inflation adjusted return if rate
of inflation during the year is 8%
9
(5f0 'Slf?TcF)T/ cKoldl
Mrf *2f RT :
(i) im (u) wm
(id) stmfN wm
(w) I (71) 9ft % 50 tr 17 fMfrl feTT I w
TRH yiRicliart *nT f*FT n*TR TT3?t 3 TOR t :
VTT
(*)
75
WTFq
60
yfdhcT (a) TTcT |
RFJtfacT I
2 (o) Market interest rate and debenture pnces are
inversely related Comment
6
(6) V.K Arora is considering investing in bond currently selling for Rs 8,785 07 (Eight thousand seven hundred eighty five and seven paisa) The bond has four years to maturity, Rs 10,000 face value and -a 8% coupon rate The next annual interest payment
is due one year from today The appropriate discount factor for investment of similar risk is 10%
Calculate the intrinsic value of the bond Should
Mrs Arora purchase the bond 9
(m) Calculate YTM of the bond
9
(0 sffSTR qR cffMf 3 yfasfa JcTT
tl chlPI
(75) 3ftteT 3 cpt
T?I %, retain 8,785 07 (3fT<3 STTT
r Ararat afa w ) 3 fof> w ti
* /
TTfrqwm H f i \r
10,000 8% tr STW c#Ni *JOTT
37T5T -STM tl T TO tfWT I '< d5RT dr*>IOF 10%
tl
(0 T W*f qUfd ftfTTTI t atftfT QVm <sl<l<WI 1% ?
J1 * Or
\
(a) Explain the process of credit rating of debt instruments adopted by credit rating agencies. 6
(6) Mr Sachin is being offered a scheme in which he has to deposit Rs 18,250 now which will give him year end return of Rs 5,000 for each of next 5 years Should he accept the offer if his required rate of return is
(u) 12% 9
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* C) rt
"3$ 18,250 Wft nTHT #TT 3ifk f*R
5 Wqf 3 3 5,000 ? yfci
frn i #tt
10%
() Differentiate between Fundamental analysis and Technical analysis 6
() .ABC companys current share price is Rs 36 and
its last dividend was Rs 2 40 If dividends are expected to grow at a constant rate g, in the future, and if required rate of return (ke) is 12%, what is ABCs expected share price 2 years from now. 9
I
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tal efTO 2 40 I vrmf# 3 'fTzTcT
(fee) 12% t, cR 3TT 3 2 TI SlrMirra RI t ?
/
Or
(3Trai)
() Explain in brief Haiy*Markowitz model of Portfolio theory 6
() The risk and return of the market portfolio are 4% and 16% respectively The risk free interest rate is 6% Comment on the efficiency of the following portfolios and if the investor has appetite for risk which portfolio should be selected 9
Portfolio Expected Risk (o)
Return
X 12% 2%
Y 16% 5%
t
Z 35% 7%
(13) tF3TTC M: 4%
3?k 16% f I *i)RsTC ZTF5T 6% tl fHH%feT
qVfci sptctt 1rwt
RsiH rT SPfft % cTt 1*11 ?
ifl<Wlfel4l glfyi (a)
UfrTthcH
TK? 12% 2%
16% 5%
35% 7%
(a) Explain the Efficient Market Hypothesis and three forms of market efficiency 6
(b) A company is expected to grow at 14% per year for the next 4 years and then to grow indefinitely at the rate of 5% The required rate of return on equity shares is 12% Assume that the company paid a dividend of Rs 2 per share last year (D0 = 2). Determine the market pnce of share
| today 9
r
( 12 ) 6024
() 'orni A wm <frr wrt
() TJ> 3H'1i "R mT fTT* 14% RT T<o
worn t 3k f*R 3FRT<T: 5% 1 <3 TtTf "CR STfTcT 12% t1
HH cftfTTT cBhiI % fnwrl 2 3Tf% 'R (D0 = 2) niisfl TTI 'SR qMn <NK china ftrffor I
Or
(3T2RT)
(a) What are the types of mutual fund schemes prevalent in India 9 Give the details * 6
() The current market price of a share is Rs 105 A call option is available for a premium of Rs 3 per share and a put option is available for a premium of Rs 2 per share Find out the net pay off of the option-holder of the call option and put option given that
(t) The strike price m both cases is Rs 110, and
(it) The share price on the exercise day is
- Rs 100 or Rs 105 or Rs 110 or Rs 120 or' Rs 130 9
(c?0 3 yrid tor tt t 7
() feft "JR ft clJniH T*TR TcT 105 tl "5f% 3 3ffiWT TR 7
fc|<*><rH viHcrf %l Sfci IqchcrH ferq [c(chrM ftrl cil W TtT,
(u) #T fT TR gfh=RT 100 T
105 f 110 TT 120 TT 130 t tl
() Outline the reforms introduced by SEBI in primary and secondary market m India 6
() Mr X considering investment in securities P and Q whose details are given below :
Expected return 13% 16%
Risk (standard deviation) 4% 7%
If a portfolio of 30% of P and 70% of Q is formed, find the
(i) Expected return of the portfolio () Minimum risk of the portfolio
(iu) Maximum risk of the portfolio 9
(*F) *7R3 feTto T3TR 3 5RT
(13) sft TRT PHH fTfeld 3TPdffif4l ijT\1
3 tr faR f :
HrqrfTcT yfdqT 13% 16%
. RSW (TIH> PcMdH) 4% 7%
'tft' 30% 70% I
RTCT WTT, cTt sTTtf <+nr*llJ :
(ii) MPdt HdH 'jilPtelH (ill) STfTH UsJH I
Or
() What do you mean by securities ombudsman 9 Name some of the grievances for which an investor can lodge a complaint with the securities ombudsman 6
() Calculate the price of equity share from the following i 9
Equity share capital (Rs 10 each) Rs 20,00,000
10% Preference capital Rs 10,00,000
Retained earnings Rs 5,00,000
12% Secured loan Rs 15,00,000
14% Unsecured loan Rs 10,00,000
Fixed Assets Rs 30,00,000
Investment in 6% Govt bonds Rs 8,00,000
Operating Profit * Rs 25,00,000
Tax rate 30%
I
P/E Ratio | 10 t
() S *F.TT f ? 5
T tferloi ftfvrTTT 3Tfdfct
dl=hMid w tfwrc rfw JkTT tl
() PiHPdftslcl 3 $Gwd) TT fh=RT MP<<*Pdd <*0f%7 : $P<i1 'fsft (10 ? R) 20,00,000 * 10% stfWT 'ffi 10,00,000 *
TifwftrT STjqft ' 5,00,000 *
12% jtfSRT 15,00,000 *
14% 31?I 10,00,000 ?
6% 3 Msr 4 8,00,000 *
UIdH W*T 25,00,000 ?-
6024 16 7,000
This question paper contains 16 printed pages]
Your Roll No
6024
B.Com. (Hons.)/ni J
Elective Group EAFinanceI Paper XX Fundamentals of Investment (Admissions of 2004 and onwards)
Time 3 Hours . Maximum Marks * 75
TFT*? : |3 J|fch : 75
(Write your Roll No on the top immediately on receipt of thi!> question paper )
TdHsJlJ 0
Note The maximum marks printed on the question paper
I
are applicable for the candidates registered with the School of Open Learning for the B Com (Hons) These marks will, however, be scaled down proportionately m respect of the students of regular colleges, at the time of posting of awards for compilation of result
Note Answers may be written either in English or in Hindi, but the same medium should be used throughout the paper
1
|
Attempt All the questions
(a) What is depository system 9 How is depository system useful for investors 9 6
(6) The rate of return of securities of ABC Ltd and XYZ Ltd in different market conditions is as follows
|
Market |
Probability |
Rate of Return | |
|
Condition |
ABC Ltd. |
XYZ Ltd | |
|
Bearish |
30 |
15% |
20% |
|
Normal |
30 |
20% |
30% |
|
Bullish |
40 |
30% |
40% |
Find out the expected return and risk (cr) for the securities of two companies. If an investor invests Rs 3,00,000 in ABC Ltd and Rs 2,00,000 m XYZ Ltd , what will be the expected return of the investor 9 9
(F) ftTFTR Wm\ TO t
cfTF F?ft t p
|
I |
ttfflMiCI | ||
|
i |
fa. | ||
|
HiUioirn | |||
|
mdl |
30 |
15% |
20% |
|
30 |
20% |
30% | |
|
40 |
30% |
40% | |
<)*i) chHpiil 'SrRTRiHl 'CR riRflo yffl'txn
q.'.Tft. feftk 3 3,00,000 7. Mfw TT t sfo fapMU 2,00,000 fW?TcT
TcTT t, cR fnlch TrrfTRT ypdd TO #TT ?
P.TO
Or
(a) Compare the following investments m terms of return, risk, liquidity and tax shelter 6
(i) Equity Bhares
() Non-convertible debentures
(m) Residential house
(w) Gold
(b) Mr Gupta makes an investment at Rs 50 The year end price of this investment under different market conditions with equal probabilities as follows
Condition Year end Price
(Rs)
Bullish 75
Normal 60
(ii) Find out the expected value of return for one year period and risk (a) of the return
(u) Also calculate inflation adjusted return if rate
of inflation during the year is 8%
9
(5f0 sftfTsFT, cKoldl
Mrf *2f RT :
(i) im (u) wm
iiu) stmfN wm
(w) I
(71) 9ft % 50 -q? 17 fMT fTT I W
TRH yiRidl3Tt f*FT TT3?t
3 TOR t :
VTT
(*)
75
WTFq
60
(i) chRiRfV yRl'+T ylfld yfdhcT vrRsIH (a) TTcT | (w) 8% %, 1ft
HRIrld *ft Mft+fad fTTI
2 (o) Market interest rate and debenture pnces are
inversely related Comment
6
(6) V.K Arora is considering investing in bond currently selling for Rs 8,785 07 (Eight thousand seven hundred eighty five and seven paisa) The bond has four years to maturity, Rs 10,000 face value and -a 8% coupon rate The next annual interest payment
is due one year from today The appropriate discount factor for investment of similar risk is 10%
Calculate the intrinsic value of the bond Should
Mrs Arora purchase the bond 9
(m) Calculate YTM of the bond
9
(0 cffr# 3 Mfacta JcTT
%l chlPI
(T3) 3TCt?T 3 T% cpr
T?I %, retain 8,785 07 (3fT<3 FTR 'FTRT r Ararat 4 w ) 3 Iro tt %i to
I /
10,000 8% tr STW c#Ni *JOTT
37T5T TT TTT -STM tl T TOR tfWT T '< d5RT TORF 10%
(0 TO <FT W*f qUfd ftfTTTI aft SRtfT tel<1l 1% ?
J1 * Or
\
(a) Explain the process of credit rating of debt instruments adopted by credit rating agencies. 6
(6) Mr Sachin is being offered a scheme in which he has to deposit Rs 18,250 now which will give him year end return of Rs 5,000 for each of next 5 years Should he accept the offer if his required rate of return is
(0 10%
(u) 12% 9
(0 uHsl 3TfctRuil sHi 3Tmf 7lf H?i)
ylshi cfTlRnlJ I
* (73) rt
"3$ 3*5* 18,250 Wft nTHT #TT 3ifk f*R
5 Wqf 3 3 5,000 ? yfd
frn i #tt
fr t :
10%
() Differentiate between Fundamental analysis and Technical analysis 6
() .ABC companys current share price is Rs 36 and
its last dividend was Rs 2 40 If dividends are expected to grow at a constant rate g, in the future, and if required rate of return (ke) is 12%, what is ABCs expected share price 2 years from now. 9
I
Ti cfr#. 36 ? t sfa
fWIT efTO 2 40 ? I vTmf# 3 'fTzTcT
s m 3 cjfe I % yfdd
(jy 12% t, cR 3TT 3 2 Tl SlrMirra RI t ?
/
Or
() Explain in brief Haiy*Markowitz model of Portfolio theory 6
() The risk and return of the market portfolio are 4% and 16% respectively The risk free interest rate is 6% Comment on the efficiency of the following portfolios and if the investor has appetite for risk which portfolio should be selected 9
Portfolio Expected Risk (o)
Return
X 12% 2%
Y 16% 5%
t
Z 35% 7%
(13) tF3TTC M: 4%
3?k 16% f I *i)RsTC ZTF5T 6% tl fHHfefeT
sptctt 1rwt
RsiH rT SPfft % cTt iii ?
TK? 12% 2%
16% 5%
35% 7%
(a) Explain the Efficient Market Hypothesis and three forms of market efficiency 6
(b) A company is expected to grow at 14% per year for the next 4 years and then to grow indefinitely at the rate of 5% The required rate of return on equity shares is 12% Assume that the company paid a dividend of Rs 2 per share last year (D0 = 2). Determine the market pnce of share
| today 9
r
( 12 ) 6024
() 'orni A wm fa wrt
(73) TJ> 3H'1i "R mT fTT* 14% "q? T<o
worn t 3k fa? 3FRT<T: 5% 1 <3 TtTf STfTcT ? 12% t1
HH cftfTTT fa cBhiI % fnwrl 2 3Tf% 'R (D0 = 2) dil R;<hi TT I "R qMn <NR china fffeT I
Or
(3T2RT)
(a) What are the types of mutual fund schemes prevalent in India 9 Give the details * 6
() The current market price of a share is Rs 105 A call option is available for a premium of Rs 3 per share and a put option is available for a premium of Rs 2 per share Find out the net pay off of the option-holder of the call option and put option given that
(t) The strike price m both cases is Rs 110, and
(it) The share price on the exercise day is
- Rs 100 or Rs 105 or Rs 110 or Rs 120 or' Rs 130 9
(c?0 3 yPdd sreJTC tt t 7
0*3) feft ft clJniH T*TTC TcT 105 tl 3 3ltfwr 7 fe'<*l 14# 2 ylfnH ferq
fci<*><rH viHcrfT tl 7 IqchrH sfa fsh fathers |q=n<rH-NRT ftri Wf : (i) ?r rRl4i 3 110 t, (u) #T fT gfh=RT 100 T
105 f 110 TT 120 TT 130 t tl
() Outline the reforms introduced by SEBI in primary and secondary market m India 6
() Mr X considering investment in securities P and Q whose details are given below :
Expected return 13% 16%
Risk (standard deviation) 4% 7%
If a portfolio of 30% of P and 70% of Q is formed, find the
(i) Expected return of the portfolio () Minimum risk of the portfolio
(iu) Maximum risk of the portfolio 9
(*F) *7R3 'STSjfe feTto T3TR 3 5RT
(13) sft TRT fHH3lPdffif4l ijT\1
HrqrfTcT yPd 13% 16%
. RSW (TIH> PcMdH) 4% 7%
30% 70% I
RTCT cTt Wtf tfR : (t) Pdt ylPTd yPdd (ii) MPdt HdH *1IftsiH (mi) MPd4l STfTH UsJH I
Or
() What do you mean by securities ombudsman 9 Name some of the grievances for which an investor can lodge a complaint with the securities ombudsman 6
() Calculate the price of equity share from the following i 9
Equity share capital (Rs 10 each) Rs 20,00,000
10% Preference capital Rs 10,00,000
Retained earnings Rs 5,00,000
12% Secured loan Rs 15,00,000
14% Unsecured loan Rs 10,00,000
Fixed Assets Rs 30,00,000
Investment in 6% Govt bonds Rs 8,00,000
Operating Profit * Rs 25,00,000
Tax rate 30%
I
P/E Ratio | 10 t
() S *F.TT f ? 5
T tferloi ftfvrTTT Pi3*iq> Srfdjfa
dl=hMid w tfwrc rfw JkTT tl
() PiHPdRslcl 3 $Gwd) TT fh=RT Hfthfcld <*0f%7 :
'fsft (10 ? # R) 20,00,000 *
TifwftrT STjqft ' 5,00,000 T
12% jtfSRT 15,00,000 *
14% wjtfsra 10,00,000 ?
fcsR hR'TMRi 30,00,000 ?
6% 3 Msr 4 8,00,000
UIdH W*T 25,00,000 ?-
WK 30%
Tt/f 3T7RT 10
6024 16 7,000
|
Attachment: |
| Earning: Approval pending. |
