Security Analysis and Portfolio Management

Assignment 1 1. Find out the yield to maturity on a 8 per cent 5 year bond selling at Rs 105? 2. Determine the present value of the bond with a face value of Rs 1,000, coupon rate of Rs 90, a maturity period of 10 years for the expected yield to maturity of 10 per cent. 3. Anns bond portfolio manager advises her to buy a 7 years, Rs 5,000 face value bond that gives 8 per cent annual coupon payments. The appropriate discount rate is 9 per cent. The bond is currently selling at Rs 4,700. Should Ann adhere to the managers advice? Assignment 2 1. ABC companys stock is currently selling at Rs 45 per share. The company has paid Re. 1 per share as dividend in the last year. It has been estimated that the stocks dividend would grow at a rate of 10 per cent per annum. It is anticipated to sell at Rs 50 in the end of the next year. Assume the dividend and price forecasts are accurate. Would you pay Rs 45 to buy and hold the stock for a year for a 13 per cent required rate of return? 2. Arun has made some forecast regarding Jasmine Companys dividend and price. According to him, the company will pay a dividend of Rs 3 per share in the future and at the end of five years holding period the stock could be sold at Rs 80. His required rate of return is 12 per cent per annum. What should be the price of the Jasmine stock?

3. Rose Company is expected to pay a dividend of Rs 2 per share for the next year. The earnings and dividends of the company are expected to grow at an annual rate of 12 per cent indefinitely. Investors expected rate of return is 15 per cent. What is the theoretical price for the Rose Companys share? Assignment 3 1. Stocks A, B and C display the following parameters. A B C Expected return 15 20 25 Expected variance 9 16 4 If an investor has to choose two securities from this, which should he select? 2. The following table provides the a and b values for the stocks for the period January 1998 November 1998. Stock a b TISCO 2.06 0.71 Tata Tea 1.5 0.92 Bajaj Auto 1.15 0.58 ITC Hotels 1.45 1.15
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Security Analysis and Portfolio Management

If the market return in 1999 is assumed to be 15 per cent, what will be the portfolio return for an investor who invests amount of money in the above mentioned stocks?

Assignment 4 1. The risk free rate of return is 9 per cent, the expected return on NSE-Nifty is 20 per cent and the variance of the index is 25 per cent. Portfolio return is 15 per cent. Estimate the risk of it. If the investor borrows 25 per cent funds at the risk free rate of return, what will be the return and risk of the portfolio? 2. The CAPM was estimated for some period in the market. The actual return of two portfolios is given below: Portfolio A: Actual return = 14 per cent Beta = 0.8 Portfolio B: Actual return = 20 per cent Beta = 1.2 The equation of the CAPM is Ri = .07 + 10 bi What can be said about the portfolios performance? Assignment 5 1. With a 9 per cent risk free rate of return, the NSE- Nifty portfolio is having an expected return of 21 per cent and a standard deviation of 8. In the X portfolio, the mean is 15 per cent and standard deviation is 8. In the Y portfolio, the mean is 20 per cent and the standard deviation is 12. For portfolio Z, the return is 21 per cent and standard deviation is 16. Choose the best portfolio. 2. Santosh wants to decide between two mutual funds X and Y. From the financial reports, he is able to calculate the average returns and the standard deviations for the funds. The current risk free rate of interest is 7 per cent. Using the Sharpe index compare the performance of X and Y funds. X Y Average return R 19% 17% Standard Deviation 21 16