CAPITAL MARKET AND PORTFOLIO MANAGEMENT ARAVIND – 09901366442 – 09902787224
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ARAVIND – 09901366442 – 09902787224
CAPITAL
MARKET AND PORTFOLIO MANAGEMENT
1. Mr. Shabd Kumar has to make a choice of investment between the
two stocks, namely A and B. The possible returns with the associated
probabilities of their occurrence for both stock A and B have been provided in
the Table given below. Based on the data provided in Table which stock he
should choose to invest in?
|
Stock A
|
Stock B
|
||
|
Probability
|
Return
|
Probability
|
Return
|
|
10%
|
-10%
|
35%
|
15%
|
|
15%
|
0%
|
25%
|
10%
|
|
20%
|
5%
|
20%
|
20%
|
|
25%
|
25%
|
10%
|
-10%
|
|
30%
|
15%
|
10%
|
25%
|
2. Mr. Saran Kumar, aged 35, is employed with Mumbai University as
a Lecturer in the English Department. He is the sole earning member of his
family. He stays in a joint family with his parents, his wife and two children
aged 5 years and 2 years. He has been deploying his savings in primarily in
bank fixed deposits and other tax savings instruments such as Public Provident
Fund (PPF) etc. However, he is not sure that whether his savings would be
adequate to meet future financial needs of his family or not. His friends have
been suggesting him to invest in stock market and have been giving him tips
also for specific stocks. Mr. Saran is reluctant to follow his friends’ advice
as his uncle had lost significant amount of money in the stock market around 10
years back. Not only his uncle had to sell off his house and his wife’s jewelry
to compensate for the loss incurred but the whole family had also faced loss of
reputation with relatives and friends. Torn between the choice of losing money
in the stock market or ending up with insufficient savings to meet his future
needs and exigencies, he decides to seek professional help to solve his
problem. He approaches his bank manager for his advice. The bank manager
directs him to you for further discussions. You are employed in the Wealth
Management Department of the bank. The department’ role is to advise the bank’s
client and offer tailor -made solutions with respect to the client’s investment
needs.
Discuss how should I go about investing my savings? Is there a way
that I make enough money without losing may savings? If yes, how? Provide your
rationale for the same.
3. Historical price of Stock A and the closing level of a Market
Index is provided in the Table given below.
|
As
on December 31
|
Price
of Stock A
|
Closing
level of the market index
|
|
2000
|
23
|
1264
|
|
2001
|
22
|
1059
|
|
2002
|
40
|
1094
|
|
2003
|
114
|
1880
|
|
2004
|
128
|
2081
|
|
2005
|
139
|
2837
|
|
2006
|
113
|
3966
|
|
2007
|
199
|
6139
|
|
2008
|
106
|
2959
|
|
2009
|
153
|
5201
|
|
2010
|
171
|
6135
|
|
2011
|
127
|
4624
|
|
2012
|
135
|
5905
|
|
2013
|
107
|
6304
|
|
2014
|
166
|
8283
|
|
2015
|
214
|
7946
|
|
2016
|
325
|
8186
|
a) Calculate Beta of the stock A.
b) The Table given below gives the expected market index values
for 31 December 2017 and the associated probabilities of occurrence for the
same.
|
Probability
|
Closing
level of the market index
|
|
10%
|
7500
|
|
15%
|
8000
|
|
20%
|
8500
|
|
25%
|
10000
|
|
30%
|
9000
|
If the 10 Year Government of India Bond (G-Sec) yield is 7%. What
is the expected prices of the stock A as on 31 December 2017?
Assignment Solutions, Case study Answer sheets
Project Report and Thesis contact
ARAVIND – 09901366442 – 09902787224
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