Ranchi University 2009 M.B.A Finance Portfolio management FM (3101) - Question Paper

Full marks: 70 Time: three hours

Candidates are needed to provide their answers in their own word as far as practicable

The figures in the margin indicate the full marks.

ans any 5 ques. including Q. No. one which is compulsory

1. An investor has analyzed a share for a 1 year holding period. The share is currently selling
for Rs. 43 but pays no dividends and there is a fifty-fifty chance that the share will sell for
either Rs. 55 or Rs. 60 by the year end. What is the expected return and risk if shares are
acquired with 80% borrowed funds? presume the cost of borrowed funds to be 12% (ignore commission
and taxes) [Marks 14]
2. "Investment is well-grounded and carefully planned speculation." explain. [Marks 14]

3. define shape single index model. How do you interpret a (alpha) and ß (beta) parameters in the
model? [Marks 14]

4. What do you mean by CAPM? List the assumption of CAPM? [Marks 14]

5. Write short notes on the following: 7×2=14
(a) Zero coupon bond
(b) Lame duck

6. "The market price of bond is universally related to the market interest rates". discuss
[Marks 14]

7. obtain the duration of a six percent coupon bond with a face value of Rs. 1,000 making annual
interest payments, if it has five years until maturity. The bond is redeemable at five percent premium
at maturity. The market interest rate is currently eight percent. [Marks 14]

8. define the multiplier approach to share evaluation. [Marks 14]

9. List the limitations of Markowitz model of portfolio selection. [Marks 14]

10. State the modern approach in the construction of the portfolio. [Marks 14]

Earning:   Approval pending.