Assignment 1 - Fundamental & Technical Analysis 5.

Anand is considering the purchase of three

1. Stock L and M have yielded the following returns securities A, B and C for the next year. The returns
for the past two years: of the securities depend on the next years which
Years Return (%) states on the stock market. The estimated rates of
L M returns are shown in the table:
1999 12 14 State of Probability of Rates of return on
2000 18 12 Market Occurrence securities
What is the expected rate of return on portfolio A B C
made up as 60% of L and 40% of M? Recession 0.25 10% 9% 14%
Average 0.50 14% 13% 12%
2. Mr. Ram is holding 5 securities in the following Boom 0.25 16% 18% 10%
amounts with the following current and expected (a) Determine each stock expected rate of return.
end of year price: (b) Calculate the co-efficient of correlation and the
Security Share Current Expected Year co-variances between Security A and B, B and C, A
amount Price End Price and C?
A Rs. 100 Rs. 50 Rs. 65
(c) Use the information: Standard Deviation for A,
B Rs. 150 Rs. 30 Rs. 40
C Rs. 75 Rs. 20 Rs. 25 B and C are 4.75, 10.19 and 2.0
D Rs. 100 Rs. 25 Rs. 30
E Rs.125 Rs. 40 Rs. 40 6. The following information for the three stocks X,
What is the expected rate of return on portfolio for y and Z are given below:
the period? Stock Risk - Free Variance Unsystematic
Return Systematic
3. Calculation of Expected Rate of Return and X 0.12 6 2
Portfolio Return: B 0.5 5 3
Stock Initial Value at Proportion of C 0.7 5 5
Investment the end of Portfolios Initial The Market is expected to have 12% of return over
the Period Market Value
a period with a return variance of 6%. Calculate the
P Rs. 5,000 Rs. 7,000 20%
Q Rs. 2,500 Rs. 4,000 10% expected return and expected risk for the three
R Rs. 4,000 Rs. 5,000 16% portfolios and Compare which stock is best based
S Rs. 1,000 Rs. 12,000 40% on the return and risk.
T Rs. 3,500 Rs. 5,000 14%
7. Rahul and Co is invested in two securities E & F.
4. The expected rates of return and the possibilities The estimated rates of returns and their chance of
of that occurrence for Alpha Company and Beta occurrence are given below:
Company Scrip are given below: Probability of Rates of Return
Probability of Return on Return on Occurrence E F
Occurrence Alpha Scrip’s Beta Scrip’s 0.5 21% 12%
0.05 -2.0 -3.0 0.5 15% 22%
0.20 9.0 6.0 (a) Determine the Standard Deviation and
0.50 12.0 11.0
Co-variance of each Stock?
0.20 15.0 14.0
0.05 26.0 19.0 (b) Find out the expected rate of return of both.
You are required to:
8. An investor is having 2 securities A & B and find
(a) Find out the expected rate of return for Alpha out the Risk and Return of the Portfolio using the
and Beta Scrip or Rate of Return of Both?
following information:
(b) If an investor invests equal proportion on both (a) Expected Rate of Return: A - 40% & B - 20%
the scrip. What would be the return? (b) Standard Deviation: A - 25% & B - 20%
(c) Correlation for both A & B is 0.25
(c) If the proportion is charged to 25% and 75% and
then to 75% and 25%. What would be the return? (d) Weights for both securities are 0.7 and 0.3.
Submit on or before 17.09.2018
Assignment 1 - Fundamental & Technical Analysis 5. Anand is considering the purchase of three
1. Stock L and M have yielded the following returns securities A, B and C for the next year. The returns
for the past two years: of the securities depend on the next years which
Years Return (%) states on the stock market. The estimated rates of
L M returns are shown in the table:
1999 12 14 State of Probability of Rates of return on
2000 18 12 Market Occurrence securities
What is the expected rate of return on portfolio A B C
made up as 60% of L and 40% of M? Recession 0.25 10% 9% 14%
Average 0.50 14% 13% 12%
2. Mr. Ram is holding 5 securities in the following Boom 0.25 16% 18% 10%
amounts with the following current and expected (a) Determine each stock expected rate of return.
end of year price: (b) Calculate the co-efficient of correlation and the
Security Share Current Expected Year co-variances between Security A and B, B and C, A
amount Price End Price and C?
A Rs. 100 Rs. 50 Rs. 65
(c) Use the information: Standard Deviation for A,
B Rs. 150 Rs. 30 Rs. 40
C Rs. 75 Rs. 20 Rs. 25 B and C are 4.75, 10.19 and 2.0
D Rs. 100 Rs. 25 Rs. 30
E Rs.125 Rs. 40 Rs. 40 6. The following information for the three stocks X,
What is the expected rate of return on portfolio for y and Z are given below:
the period? Stock Risk - Free Variance Unsystematic
Return Systematic
3. Calculation of Expected Rate of Return and X 0.12 6 2
Portfolio Return: B 0.5 5 3
Stock Initial Value at Proportion of C 0.7 5 5
Investment the end of Portfolios Initial The Market is expected to have 12% of return over
the Period Market Value
a period with a return variance of 6%. Calculate the
P Rs. 5,000 Rs. 7,000 20%
Q Rs. 2,500 Rs. 4,000 10% expected return and expected risk for the three
R Rs. 4,000 Rs. 5,000 16% portfolios and Compare which stock is best based
S Rs. 1,000 Rs. 12,000 40% on the return and risk.
T Rs. 3,500 Rs. 5,000 14%
7. Rahul and Co is invested in two securities E & F.
4. The expected rates of return and the possibilities The estimated rates of returns and their chance of
of that occurrence for Alpha Company and Beta occurrence are given below:
Company Scrip are given below: Probability of Rates of Return
Probability of Return on Return on Occurrence E F
Occurrence Alpha Scrip’s Beta Scrip’s 0.5 21% 12%
0.05 -2.0 -3.0 0.5 15% 22%
0.20 9.0 6.0 (a) Determine the Standard Deviation and
0.50 12.0 11.0
Co-variance of each Stock?
0.20 15.0 14.0
0.05 26.0 19.0 (b) Find out the expected rate of return of both.
You are required to:
8. An investor is having 2 securities A & B and find
(a) Find out the expected rate of return for Alpha out the Risk and Return of the Portfolio using the
and Beta Scrip or Rate of Return of Both?
following information:
(b) If an investor invests equal proportion on both (a) Expected Rate of Return: A - 40% & B - 20%
the scrip. What would be the return? (b) Standard Deviation: A - 25% & B - 20%
(c) Correlation for both A & B is 0.25
(c) If the proportion is charged to 25% and 75% and
then to 75% and 25%. What would be the return? (d) Weights for both securities are 0.7 and 0.3.
Submit on or before 17.09.2018