POKHARA UNI VERSI TY

Level: Bachelor Semester Spring Year : 2010

Programme: BBA-BI Full ar!s: 100
"ourse: Port#olio anagement an$ Investment
%ecisions
Pass ar!s: &'
(ime : )hrs*
Candidates are required to give their answers in their own words as far
as practicable.
The figures in the margin indicate full marks.
Attempt all the questions.
1* a+ %i##erentiate the investment #rom the speculation* ,o- $o .ou ma!e
a goo$ investment $ecision/
0+ ,o- securit. mar!ets contri0ute in the econom. o# a countr./
12plain*
3
4
2* a+ 5Investing in a port#olio is pro#ita0le than investing in an in$ivi$ual
asset5* %o .ou agree or $isagree -ith this statement/ 12plain*
OR
,o- investors select an optimal port#olio #rom the t-o ris!. assets/
12plain -ith illustrations*
0+ 6hat role $oes the in$ivi$ual7s set o# in$i##erence curves pla. in the
selection o# the optimal port#olio/ %iscuss*
4
4
3
)* a+ r* 8am9 an investor9 is see!ing #or investment a$vices* You as a
stoc! anal.st are provi$e$ t-o alternative investments9 sa.9 S"B:L
an$ 1BL -ith #ollo-ing pro0a0ilit. $istri0ution o# the return:
State of economy Probability R(SCBNL) R(EBL)
6on$er#ul 0*20 -20; 2';
<oo$ 0*20 -10 20
Average 0*20 ' 1'
Ba$ 0*20 1' '
,orri$ 0*20 2& -10
As a stoc! anal.st9 .ou are re=uire$ to suggest r* 8am #or the
investment* 6hat $o .ou suggest r* 8am/
10
1
0+ Assume three common stoc!s have the #ollo-ing 0etas:
>
1
? 1*2 >
2
? 0*3 >
)
? 2
i* "alculate the 0eta #or a port#olio consisting o#
e=ual rupees investment in each stoc!*
ii* I# an investor thought that a port#olio 0eta o#
1*' -as appropriate9 in$icate the proportion o# #un$s that
coul$ 0e investe$ in stoc! 1 an$ 2 -hen the investment
proportion in stoc! ) is 20 percent*
'
&* a+ You are given the #ollo-ing in#ormation:
8is! #ree rate o# return ? ';
ar!et ris! premium ? ';
Stock Beta Expected Return (%)
AB" 2*00 12
S"B 0*4' 10
B:% 1*4' 20
Base$ on the a0ove in#ormation9
i* 6rite SL e=uation
ii* %ra- a SL
iii* Fin$ re=uire$ rate o# return on each stoc!
iv* I$enti#. the misprice$ stoc! suggest #or investment $ecision*
0+ 6hat is "AP/ 6rite an. t-o $i##erences 0et-een SL an$ "L*
2
2
)
)
'
'* a+ :epal ,ealth "are Lt$* is selling @ percent9 1'-.ear Bon$* I# mar!et
interest rate o# the similar ris! class Bon$ is A*'0 percent at -hat
price the Bon$ shoul$ 0e purchase$ no-/
0+ (he ,imala.an 0on$ has 3 .ear to maturit.9 a coupon rate o# 10
percent9 an$ sells #or 8s*@00*
i* 6hat is the current .iel$ on the 0on$/
ii* 6hat is the .iel$ to maturit./
c+ A"" stoc! currentl. pa.s 8s*'* It is e2pecte$ to gro- at 20 percent
#or coming ) .ears an$ ' percent therea#ter* I# the re=uire$ rate o#
'
'
'
2
return is 10 percent -hat shoul$ 0e the price o# A""/
A* a+ A call option ena0les the hol$er to ac=uire one shares o# stoc! at
8s*&0 a share #or each option hel$* (he option has ) months until its
e2piration* (he mar!et price is currentl. 8s*)' per share9 an$ the
e2pecte$ stan$ar$ $eviation o# its continuousl. compoun$e$ returns
over the near #uture is 0*&0* "urrentl. the call option is selling at
8s*'* (he short term interest rate is 3 percent* Bn the 0asis o# this
in#ormations*
i* 6hat is the proper value o# the option using the Blac!-
Scholes option pricing mo$el/
ii* 6hat $o .ou thin!9 is the option overvalue$9 or
un$ervalue$ or price$ Cust right/
iii* I# .ou 0elieve in these num0ers9 -hat shoul$ .ou $o/
0+ (he :ingla Investment "ompan. has sol$ 109009000 shares o# a #un$
to investors* "urrentl. the #un$ has accrue$ investment management
#ee o0ligations o# 8s*39009000* (he #un$s7 port#olio is sho-n 0elo-:
Stock No!of "are Price per "are
Shaini
8ana
asai
109000
209000
2'9000
8s*'00
&00
200
"alculate the #un$7s net asset value*
A
2
2
'
4* 6rite short notes on any t#o$
a+ (echnical Anal.sis
0+ 6arrants
c+ Securit. Boar$ o# :epal
2D'
)