MF0010 & SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

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ASSIGNMENT

DRIVE	SPRING 2016
PROGRAM	MBA
SEMESTER	3
SUBJECT CODE & NAME	MF0010 & SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT
BK ID	B1754
CREDITS	4
MARKS	60

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.

Question.1. Describe the investment process.

Answer:Investment Policy:The initial step, setting investment policy, involves determining the inverstor's objectives ant the amount of his or her investable wealth. Because there is a positive relationship between risk and return for sensible investment strategies, it is not appropriate for an investor to say that his or her objective is to "make a lot of money." What is appropriate for an investor in this situation is to state that the objective is to attempt to make a lot of money while recognizing that there is some chance that large losses may be incurred. Investment objectives should be stated in terms of both risk and

Question.2. Define primary markets? Define and Explain the role of financial intermediaries.

Answer:A financial intermediary is an institution or individual that serves as a conduit for parties in a financial transaction. According to classical and neoclassical economics, as well as most mainstream economics, a financial intermediary is typically a bank that consolidates deposits and uses the funds to transform them into loans. According to some heterodox economistsand others, financial intermediaries simply do not exist.

Through the process of financial intermediation,

Question.3. Define technical indicators and its types and Discuss on Candlestick charts?

Answer:In Technical Analysis, Mathematical calculations used to derive the future price of stock, index, forex, currency or commodity based on its historical price, volume or other information data is known as Technical Indicator. Some of the common technical indicators used in financial markets are simple moving average (SMA), exponential moving average (EMA), moving average convergence & divergence (MACD), relative strength index (RSI), stochastic, bollinger bands, parabolic SAR, average directional index (ADX),

Question.4. Briefly explain Assumptions of Markowitz Model. Explain Efficient Frontier or Efficient set.

Answer:Harry Markowitz put forward this model in 1952. It assists in the selection of the most efficient by analyzing various possible portfolios of the given securities. By choosing securities that do not 'move' exactly together, the HM model shows investors how to reduce their risk. The HM model is also called Mean-Variance Model due to the fact that it is based on expected returns (mean) and the standard deviation (variance) of the various portfolios. Harry Markowitz made the following assumptions while developing the HM

Question.5. Explain the assumptions of Capital Asset Pricing Model (CAPM). Give a short note on Separation Theorem, Capital Market Line (CML) and Security Market Line (SML)

Answer:Assumptions of CAPM

Capital asset pricing model (CAPM) is one which establishes the relationship between the required rate of return of a security and its systematic risk also known as risk which is not diversification. It can be represented mathematically as –

For example if we know the risk free rate of return is 5 percent and beta of security is 2 and excepted market return is10 percent then we can compute the excepted return of stock will be 15 percent which can be calculated as 5 + 2(10-5)

Question.6. Explain the Structure of Mutual Fund Operations. Types of Mutual Fund

Answer:Board of Directors: A management investment company (mutual fund company) has a CEO, a team of officers and a board of directors. Each one of these entities is responsible for serving the interests of the shareholders. The primary responsibility of the officers and the board of directors is to handle the investment company's administrative matters.

The board of directors is elected by the investment company's shareholders. The board defines the type of funds that will be offered to the public.

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