Distinguish between American option and European option? ANSWER -

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MARKET RISK MANAGEMENT
CASE STUDY : 1
On 1st September, Mr Kadam enters into a future contract to purchase 1000 equity shares of ABC Ltd. at an
agreed price of Rs 100 in December. If on the maturity date (as determined by the rules of exchange for the
month of December), the price of the equity stock rises to Rs 120. Mr Kadam will receive from Mr Sathe,
Rs 20 per share and otherwise if price of the share falls to Rs 90 Mr Rao will pay Rs 10 per share to Mr
Kadam.
Q1) Define the term Future contracts?
Q2) Explain features of Future contracts?
Q3) Explain types of Future contracts?
Q4) Distinguish between American option and European option?
CASE STUDY : 2
With the progressive deregulation and liberalization of the Indian financial sector, Banks are increasingly
exposed to various kinds of risk – both financial and non-financial efficiency of every bank depends on how
effectively it is managing the risks and ensuring a competitive risk adjusted return of capital. For this, it is
essential to have in place effective risk management and internal control systems and Internal & External
Audits, which are crucial to the conduct of banking business not only to lead the bank more profitability but
also in compliance of prudential guidelines, for which a professional approach in risk management.
Q1) Define the term Auditing?
Q2) What are the qualities should auditor have?
Q3) Comment. Audit function adds creditability?
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Q4) Explain the role of Internal Auditors?
CASE STUDY : 3
Fraud is an intentional action that results in misstatement of the financial statements. Bank transactions are
so numerous and varied that frauds can perpetrate in any areas. Normally a bank fraud is a deliberate act of
omission and or commission by any person, carried out in the course of banking transaction or in the books
of accounts maintained manually or under computer system in banks, resulting into wrongful gain to any
person for a temporary period or otherwise, with or without any monitory loss to the bank.
Q1) Define the term Fraud?
Q2) Distinguish between Error or Fraud?
Q3) Explain types of common frauds in Banks?
Q4) Explain the term KYC (Know Your Customer)?
CASE STUDY : 4
Money laundering has reached new levels of sophistication with the advent of technologies that eliminate
traditional face-to-face interaction with customers. A bewildering variety of electronic payment systems are
currently being developed around the world, using the latest innovations in electronic baruking.
Q1) Why these systems may prove attractive to money launderers?
Q2) Explain the term E-Banking?
Q3) Explain the advantages from the depositors (Bank Saving and Current Account holders) point of view?
Q4) How it is different from traditional banking system?



Management Control Systems
Total Marks: 80
Note : All Questions are Compulsory
Each Question Carries Equal Marks 10 Marks
1. Consider a Retail Outlet. What should be the objectives of Management
Control system for the retail outlet? Examples would strengthen your views.
2. Explain the Just-in-time and total quality management techniques of control.
Also, elaborate the implication of these techniques for management control.
3. Describe the need for MIS in a business organization focusing on Management
Control System. Also explain the important considerations in designing
Management Information System (M l S) for the purpose of Management
Control
4. Explain how by designing an appropriate Management Control System , the
different types of risks faced by the banks can be tackled.
5. Describe and illustrate significance of human behavior patterns in management
control.
6. Define Transfer pricing. Describe the various transfer pricing methods in detail
7. Differences and similarities between Management Control and Task Control
8. Give impact of Internet on Management Control.





Investment Analysis Management
Total Marks -80
CASE STUDY 1 (Marks 20)
Downloaded Data of Bank of Baroda and HDFC Bank from www.nseindia.com of last 11 years has
been summarized as follows. You are required to analyze the data using appropriate statistical tools,
interpret the results and provide necessary advice to the investors as research analyst.
Sr.No Date Symbol
Close
Price Symbol Sr.No Date
Close
Price
1 1-Apr-97 BANKBARODA 56.75 HDFCBANK 1 1-Apr-97 46.45
2 1-Apr-98 BANKBARODA 108.35 HDFCBANK 2 1-Apr-98 72.8
3 1-Apr-99 BANKBARODA 45 HDFCBANK 3 1-Apr-99 67.6
4 3-Apr-00 BANKBARODA 47.4 HDFCBANK 4 3-Apr-00 247.15
5 30-Mar-01 BANKBARODA 60.45 HDFCBANK 5 2-Apr-01 223.15
6 1-Apr-02 BANKBARODA 50.45 HDFCBANK 6 1-Apr-02 233.65
7 1-Apr-03 BANKBARODA 86.45 HDFCBANK 7 1-Apr-03 234.3
8 1-Apr-04 BANKBARODA 250.45 HDFCBANK 8 1-Apr-04 384.35
9 1-Apr-05 BANKBARODA 221.85 HDFCBANK 9 1-Apr-05 551.55
10 3-Apr-06 BANKBARODA 232.95 HDFCBANK 10 3-Apr-06 773.85
11 30-Mar-07 BANKBARODA 215.05 HDFCBANK 11 30-Mar-07 954.15
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
CASE STUDY 2 (20 Marks)
Given below are the returns on the three stocks Supertex, Colourtex and Wivetex for a four year
period. Compute the average returns, variance and standard deviation if a portfolio is constructed
such that the stock has lowest standard deviation accounts for 50% of the funds, a stock having the
next lowest standard deviation accounting for 30% and the third stock accounting for 20% of the
funds.
Period ( Years) Annual Returns (%)
Supertex Colourtex Wivetex
1 10 11 8
2 12 9 12
3 14 13 9
4 16 17 15
CASE STUDY 3 (20 Marks)
Pruthvi Hardware Ltd. Invested on 1-04-2006 in equity shares as below:-
In September 2006, Mafatlal Ltd. Paid 10% dividend and in October, 2006 Nataraj Ltd. Paid 30% dividend.
On 31-3-2007, market price of shares of Mafatlal Ltd. And Nataraj Ltd. Were Rs.220 and Rs.290 respectively.
Pruthvi Hardware ltd. have been informed by their investment advisor that :-
Company Number of Shares Cost (Rs.)
Mafatlal .Ltd. .1000 (Rs.100 Each) 2,00,000
Natraja Pencil Ltd. 500 (Rs.10 each) 1,50,000.
1) Dividend s from Mafatlal L Ltd. And Nataraj Ltd. For the year ending 31-03-2008 are likely to be
20% and 35% respectively.
You are required to
1) Calculate the average return from the portfolio for the year ended 31-03-2007.
2) Advice P Ltd. Of the comparative risk of two investments by calculating the standard deviation in
each case.
CASE STUDY 4 (20 Marks)
A) The following table provides details about three mutual fund portfolios. Find out the
Sharpe, Treynor and Jensen Index and rank them. What are your suggestions to the investors?
(10 Marks)
Portfolio Return on
Portfolio
Standard Deviation Beta
Equity Fund 26 12 1.25
Mid Cap
Fund
40 10 0.80
Infra – Fund 24 14 1.40
Market Index 18 1.00
Risk Free Rate of Return : 6%
1. The beta of Equity fund is higher than the Beta of Mid Cap fund but the returns are higher in
Mid Cap Fund than Equity Fund. Do you agree with this statement? If yes, explain with
reasonable examples.
2. The beta of Infra – Fund is the highest among all three fund but the returns is the lowest
among all three fund. Explain with reasonable examples.
B) Share of HDFC and BANK of Baroda display the following returns over the past two years:-
(10 Marks)
YEAR HDFC BANK OF BARODA
First Year 232 775
Second Year 215 955
1) What is the expected return on a portfolio made up of 40% of Pepsi and 60% of Coca-Cola?
2) What is the standard deviation of each share?
3) What is the covariance of Share of Pepsi and Coca-Cola?
4) What is the correlation coefficient?
5) Interpret the results in each case and advice the investors for investment decision?