Security Analysis and Portfolio Management IIBM EXAM ANSWER SHEETS PROVIDED. MBA EMBA BMS DMS ANSWERS PROVIDED. DR. PRASANTH MBA PH.D. DME MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com
· This section consists of Multiple choice & Short Note type questions.
· Answer all the questions.
· Part One carries 1 mark each & Part Two carries 5 marks each.
Part One:
Multiple choices:
1. Beta is useful for comparing the relative _____________ of different stocks.
a. Business risk
b. Systematic risk
c. Liquidity risk
d. Country risk
2. The price prevailing in market is called
a. Market security
b. Market value
c. Market price
d. None of the above
3. Line charts, Bar charts, Candles tic charts are the parts of
a. Fundamental analysis
b. Technical analysis
c. Company analysis
d. None of the above
4. A market portfolio is a portfolio consisting of a weighted __________ in the market.
a. Sum of every equity
b. Sum of every liabilities
c. Sum of every assets
d. None of the above
5. The date on the option contract is called the ___________
a. Expiration date
b. Date of maturity
c. Both a) & b)
d. None of the above
6. A forward contract is an agreement made today between a ___________ to exchange the
commodity
a. Buyer & buyer
b. Buyer & seller
c. Seller & seller
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d. None of the above
7. Portfolio means a collection or combination of financial assets such as
a. Shares
b. Debentures
c. Government securities
d. All of the above
8. CAPM is the abbreviation of
a. Capital Asset Pricing Measure
b. Capital Average Pricing Model
c. Capital Asset Pricing Model
d. None of the above
9. In India the secondary market for shares is regulated by
a. RBI
b. SEBI
c. Company law board
d. There is no regulatory authority
10. The risk of the whole market as measured by ‘Beta’ is
a. 1
b. 0
c. -1
d. None of the above
Part Two:
1. What does ‘!’ (Beta) mean in risk management?
2. Write a note on ‘options’ & ‘future’ derivatives.
3. Define Capital market theory.
4. Write a short note on CAPM.
END OF SECTION A
Section B: Case lets (40 marks)
· This section consists of Case lets.
· Answer all the questions.
· Each Case let carries 20 marks.
· Detailed information should form the part of your answer (Word limit 150 to 200 words).
Case let 1
TOUAX is a French company and is currently Europe’s no. 1 in shipping containers and river barges,
and no. 2 in modular building and freight railcars. The group provides operating leases to customers
around the world, both on its own account and for third-party investors. On June 24, 2009,
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TOUAX announced that its capital increased by waiving preferential subscription rights but with
priority for existing shareholders, launched on 18 June 2009 for a total of E17, 851,519.76 (gross)
through the issue of 936,596 new shares which were subscribed in the entirely. Following partial
application of the extension clause, 952,747 shares were placed or 101.72% of the issue; total
proceeds were E18, 159,357.82.
This rights issue has enabled the Group to strengthen its financial structure, to position itself with
advantage for possible acquisitions of tangible stock, and to grasp opportunities thrown up by the
crisis (purchase of shipping containers, modular buildings, river barges and railcars, for hiring out on
mainly long-term leases). 370,062 new shares allotted under absolute entitlement were subscribed or
39.51% of the total number of new shares issue. Another 555,685 shares were applied for subject to
cutting back in the event of over subscription, and orders for these were all filled. Another 27,000
shares had been applied for by the general public, and following partial application of the extension
clause it proved possible to fill orders for all of these.
All the result of the right issue, TOUAX is well placed to respond to the boom in corporate
outsourcing of non-core assets, and every day provides over 5,000 customers with quick and flexible
leasing solutions. TOUAX is now listed on Euronext in Paris – NYSE Euronext Compartment C
(ISIN Code FR0000033003), and features in the SBF 250 Index.
Questions:
1. After analyzing the case, do you think all the companies that can afford, should opt for right issue
to improve their financial status?
2. What do you analyze as the two main advantages of the right issue?
Case let 2
In mid-February 1994, the British paper, the Sunday times ran on article that alleged that a 1 billion
sterling ($ 750 M) sale of equipment by British companies to Malaysia was secured only after bribes had
been paid to Malaysian government officials and after the British overseas development administration
(ODA) had agreed to approve a 234 million sterling grant to the Malaysian government for a hydroelectric
dam of (according to the Sunday times) dubious economic value. The clear implication was that UK
officials, in their enthusiasm to see British companies win a large defence contract, had yield to pressures
from “corrupt” Malaysian officials for bribes – both personal and in the form of the 234 million sterling
development grants.
What happened next took everyone by surprise. The Malaysian government promptly announced a an on
the impact of all British goods and services into Malaysia and demanded an apology from British
Government. Officially the ban applied only to government orders for British goods and services; the
private sector was free to busy as it chose. However, British companies with experience in the region were
nervous that the private sector would follow the government’s lead in shunning British products. At stake
was as much as 4 billion sterling in British exports and construction activities in Malaysia and a presence
in one of the world’s fastest growing developing economies (Malaysia’s economic growth has averaged
8% per annum since 1989). In announcing the ban, Malaysia’s Prime Minister, Dr Mahathir Mohammad,
noted that the British media portrays Malaysians as corrupt because “ They are not British and not
white”…And “we believe the foreign media must learn the fact that developing countries, including a
country led by brown Moslem, have the ability to manage their own affairs successfully”.
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IIBM Institute of Business Management
The British government responded by stating, it could not tell the British press what and what not to
publish, to which Dr Mahathir replied there would be “no contracts for British press freedom to tell lies”.
At the same time, the British government came under attack from members of parliament in Britain, who
suspected the government acted unethically and approved the ODA hydroelectric grant to help British
companies win orders in Malaysia.
Questions:
1. If you are the CEO of a British company that now faces the loss of a lucrative contract in Malaysia
because of the dispute. What action should you take?
2. How do you think British government should respond to the Malaysian action?
END OF SECTION B
Section C: Applied Theory (30 marks)
· This section consists of Applied Theory Questions.
· Answer all the questions.
· Each question carries 15 marks.
· Detailed information should form the part of your answer (Word limit 200 to 250 words).
1. What do you mean by risk management? Elaborate the various kinds of systematic and nonsystematic
risks.
2. What do you mean by Portfolio management? What are the methods of calculating portfolio
performance evaluation?
END OF SECTION C
S-2-300813
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