Ms - 44 - Security Analysis And Portfolio Management

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ASSIGNMENT

Course Code                                                      :               Ms - 44
Course Title                                                       :               Security Analysis And Portfolio Management
Assignment Code                                            :               MS-44/TMA/SEM-II/2016
Coverage                                                             :               All Blocks


Note: Attempt all questions and submit the assignment on or before 31st October, 2016 to the coordinator of your study centre.


Question.1. Define Investment. Discuss the effect of changes in investment environment on investment decisions. Explain the various types of risks involved in investment.

Answer:To invest is to allocate money (or sometimes another resource, such as time) in the expectation of some benefit in the future.

In finance, the expected future benefit from investment is called a return (to investment). The return may consist of capital gain and/or investment income, including dividends, interest, rental income etc. The economic return to an investment is the appropriately discounted value of the future returns to the investment.

Investment generally results in acquiring an asset, also called an investment. If the asset is available at a price worth investing, it is normally expected




Question.2. (a) What is 'Primary Market’? Discus the important developments that have taken placerecently in Indian primary market. .

Answer:The primary market is the part of the capital market that deals with issuing of new securities. Companies, governments or public sector institutions can obtain funds through the sale of a new stock or bond issues through primary market. This is typically done through an investment bank or finance syndicate of securities dealers.


(b) What do you understand by Initial Public Offer (I.P.O.)? Who are allowed to makean I.P.O.?Discuss the salient features of the SEBI guidelines on I.P.O.

Answer:An IPO is when a company which is presently not listed at any stock exchange makes either a fresh issue of shares or makes an offer for sale of its existing shares or both for the first time to the public. Through a public offering, the issuer makes an offer for new investors to enter its shareholding family.

The shares are made available to the investors at


Question.3. (a) Critically evaluate the fundamental analysis. How is it useful to a prospectiveinvestor?

Answer:Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements (usually to analyze the business's assets, liabilities, and earnings); health; and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, and considers factors



(b) What are the various techniques of technical analysis? Explain the various challengesto technical analysis.

Answer:In finance, technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the same tools of technical analysis, which, being an aspect of active management, stands in contradiction to much of modern portfolio theory. The efficacy of both technical and fundamental analysis is disputed by the efficient-market hypothesis which states that stock market prices are essentially unpredictable.

Dow theory is based on the collected writings of Dow Jones co-founder and editor Charles Dow, and inspired the use and development of modern technical




Question.4. (a) What is Markowitz Portfolio Theory? Explain the basic assumptions of MarkowitzTheory.

Answer:MPT - Modern Portfolio Theory - represents the mathematical formulation of risk diversification in investing, that aims at selecting a group of investment assets which have collectively lower risk than any single asset on its own.



(b) Explain the logic of the Arbitrage-Pricing Theory (APT). Compare andcontrast with the Capital Asset Pricing Model (CAPM) ?

Answer:A simplistic answer that the theoreticians are going to hate, but has worked for me in the real world for 40 years: CAPM is a way of explaining why a price might vary due to external forces – an energy company’s share price will vary due



Question.5.Critically evaluate the three formula plans and suggest modification, if any, to make them useful for investors in Indian Stock Market.

Answer:The portfolio which is once selected has to be continuously reviewed over a period of time and then revised depending on the objectives of the investor. The important factors to take into consideration are the timing for revision.

The timing for revision is found out by the use of formula plans. These plans are predetermined with distinctive objectives and rigidity of rules. Each

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