FIN 301- SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

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ASSIGNMENT

DRIVE	SPRING 2018
PROGRAM	MBA
SEMESTER	3
SUBJECT CODE & NAME	FIN301- SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT
BK ID	B1754
CREDITS	4
MARKS	30

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

SET I

Question. 1. Explain the business cycle and leading coincidental & lagging indicators. Analyse the issuesin fundamental analysis.

Answer:Assorted economic statistics that provide valuable information about the expansions and contractions of business cycles. These statistics are grouped into three sets–lagging, coincident, and leading. Leading economic indicators tend to move up or down a few months BEFORE business-cycle expansions and contractions. Coincident economic indicators tend to reach their peaks and troughs AT THE SAME TIME as business cycles. Lagging economic indicators tend to rise or fall a few months AFTER business-cycle expansions and contractions.

Question. 2. Explain the Meaning and Benefits of Mutual Fund

Answer:When you purchase a share in the mutual fund, you have a small stake in all investments included in that fund. Hence, by owning a mutual fund, the investor participates in gains or losses of all the companies in the fund. For instance, you can take a mutual fund as a basket of investments. When you purchase a share of that mutual fund, you are buying one share of this basket and hence has an ownership in the all the investments in one

Question. 3. 1. Briefly explain Financial Derivatives.

Answer: A derivative is a financial security with a value that is reliant upon or derived from an underlying asset or group of assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its price is determined by fluctuations in the underlying asset. The most common underlying assets include stocks,

3. 2. Differentiate between Stocks and Bonds

Answer: Stocks, or shares of stock, represent an ownership interest in a corporation. Bonds are a form of long-term debt in which the issuing corporation promises to pay the principal amount at a specific date.

Stocks pay dividends to the owners, but only if the corporation declares a dividend. Dividends are a distribution of a corporation's profits. Bonds pay interest to the bondholders.  Generally, the bond contract requires that a fixed interest payment be

SET II

Question. 1.

This distribution of returns for share P and the market portfolio M is given above. Calculate the Expected Return of Security P and the market portfolio, the covariance between the market portfolio and security P and beta for the security.

Calculate

1. Expected Return of Security P and the market portfolio,

2. Covariance between the market portfolio and security P

3. Beta for the security. 5+3+2=10

Answer:The expected return of the portfolio

Question. 2. Explain the four crucial criteria of Financial Ratio while judging financialperformance.

Answer:Financial ratios are indicators used to analyze an entity’s financial performance. Financial ratios are used by bankers, creditors, shareholders and accountants to evaluate data presented on an entity’s financial statements. Depending on the results of the evaluations, bankers and creditors may choose to extend or retract financing and potential shareholders may adjust the level of commitment in a company. Financial ratios are important tools that judge the profitability, efficiency, liquidity and solvency of an entity.

Question. 3. 1. Distinguish between Business Risk and Financial Risk

2. Discuss the Factors affecting Industry analysis

Answer:1. Financial risk refers to a company's ability to manage its debt and financial leverage, while business risk refers to the company's ability to generate sufficient revenue to cover its operational expenses. An alternate way of viewing the difference is to see financial risk as the risk that a company may default on its debt payments, and business risk as the risk that the company will be unable to function as a profitable enterprise.

Financial Risk

A company's financial risk is related to the company's use of

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