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Title Name Amity Solved Assignment for Equity Research and portfolio Management
University AMITY
Service Type Assignment
Course PGDM-(Financial-Management)
Semester Semester-II Course: PGDM-(Financial-Management)
Short Name or Subject Code Equity Research & portfolio Management
Commerce line item Type Semester-II Course: PGDM-(Financial-Management)
Product Assignment of PGDM-(Financial-Management) Semester-II (AMITY)
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  Questions :-
        1.                                                                       Equity Research & portfolio Management

          Assignment A

          1. (i) Sweat equity is the best form of reward for those who contribute to the growth of a company. Discuss.

                    (ii) Why do investor add real estate in their portfolio?

                      (iii) What are the steps taken by SEBI in the primary market to protect investors?

          1. (i) Discuss the dematerialisation and rematerialisation processes in NSDL?

            (ii) ‘Stock market indices are the barometers of the stock market’ – Discuss?

            (iii) How can increasing short interest give a bullish interpretation why?

              3.(i) Explain the utility of the economic analysis and state the economic factors considered for this analysis.

          (ii) What is meant by fundamental analysis? How does fundamental analysis differ from technical analysis?

          (iii) What “industry life cycle exhibits the status of the industry and gives the clue to entry and exit for investors” Elucidate.

          4. Stocks L and M have yielded the following returns for the past two years.   

      Years   

      Return

                      %                                                     

       

      L

      M

      1995

      12

      14

      1996

      18

                                  


      (i)  What is the expected return on portfolio made up of 60 percent of L and 40 percent of M? Find out the standard deviation of each stock.

      Expected return on portfolio is –

      (ii) What is the covariance and co-efficient of correlation between stock L and M?

      (iii) What is the portfolio risk of a portfolio made up of 60 percent of land 40 percent?

      1. Write short notes on any three of the following.

      a) Technical Analysis v/s fundamental analysis

                 d) Immunisation of bond portfolio & its technique. 

  1.             e) Capital and money market securities.
    1. Mr. Rajan Tiwari is planning to invest in the equity stocks of Xerox India Limited. The current share price is Rs.150 per share. Xerox has declared a dividend of Rs.10 per share for the current year. Mr. Tiwari is of the opinion that the dividend per share will remain at the same level for the next two years, after which it will grow at the rate of 25% per annum in the third and fourth years. From the fifth year onwards, dividends are expected to grow at a normal rate of 12% per annum. If the required rate of return of Mr. Tiwari is 14% per annum, do you suggest him to purchase the share at the current price.

     Intrinsic value of the stock is Rs.551.98 and it is recommended to

  2. Intrinsic value of the stock is Rs.551.98 and it is not recommended
  3. Intrinsic value of the stock is Rs.517.83 and it is recommended to
  4. Intrinsic value of the stock is Rs.517.83 and it is not recommended
  5. Intrinsic value of the stock is Rs.150 and it is recommended to
  6. Present value of future cash flows for first four years including current year is –
    1. Sundaram finance Ltd. has an investment opportunity available which will involve a capital outlay in each of the next 2 years and which will produce benefits during the following 3 years. A summary of the financial implications of this investment is given below. 
      1. Vishnu ltd, has just paid a dividend of Rs.16 per share. As a part of its major reorganization of its operations, it has stated that it does not intend to pay any dividend for the next two years. In three years’ time it will commence paying dividend at Rs.12 per share and the directors have indicated that they expect to achieve dividend growth at 14% p.a. thereafter. If the reorganization does not take place, dividend will be paid in the next two years and the expected dividend growth will remain at the present level of 8% p.a. The firm’s cost of equity is 18% (i.e. the return expected by the equity investors) and will be unaffected by the reorganization. What will be the value of firm’s shares in both the situations? Moreover, advice the directors to which process they should adopt for? Purchase the share to purchase the share. Purchase the share. To purchase the share purchase the share.

     

    Year

    Cash Flow (Rs.’000)

    1

    (2,000)

    2

    (2,000)

    3

    200

    4

    2,300

    5

    4,100

      

    Sundaram Ltd., currently has 1,00,000 shares in issue. The dividend just paid was Rs.25 per share. In the absence of the above investment, dividends are expected at this level for the next 3 years, but will then demonstrate perpetual growth of 15 percent p.a. Sundaram finance Ltd. is currently all equity financed and the required rate of return of the equity investor is estimated to be 18 percent. The only possible way of financing the investment is, therefore, to reduce the dividend payments made in the next 2 years. Cash received from the new investment is therefore, to reduce the dividend payments made in the 10% will also be maintained because of other operations.

    What will be the present market price? What will be the market price after the acceptance of the investment (assuming the market knows the dividend changes that will result from the investment using a dividend valuation model?)  

     

     

    CASE STUDY

    EQUITY RESEARCH

    Mr. Prashant Gupta is interested in investing in equity shares of Infosys and Hamdard. Infosys Technologies Ltd. (NASDAQ: INFY) which was started in 1981 by seven people with US$ 250. Today, it is a global leader in the "next generation" of IT and consulting with revenues of over US$ 4 billion. It offers span business and technology consulting, application services, systems integration, product engineering, custom software development, maintenance, re-engineering, independent testing and validation services, IT infrastructure services and business process outsourcing. Hamdard (Wakf) Laboratories, India is a famous pharmaceutical company in India known for its Unani and Ayurvedic products. It is the world´s largest manufacturer of Unani medicinesSome of its more famous products include Safi, Sharbat Rooh Afza, Cinkara, Roghan Badam Shirin and Pachnol. It is associated with Hamdard Foundation, India.

    Being conservative in nature, he wants to determine the risk associated with investments. In specific terms, he wants to seek data related to both levered and unlevered beta of these companies. He approaches Nitin Shah, a financial consultant to do the needful. Nitin has collected the relevant information detailed below:

    Number

    (MONTHS)

    INFOSYS*

    HAMDARD*

    S&P CNX NIFTY**

    1

    2

    3

    4

    5

    6

    7

    8

    9

    10

    11

    12

    13

    14

    15

    16

    17

    18

    19

    20

    21

    22

    23

    0.1455

    0.1291

    -0.1036

    -0.0643

    -0.0673 

    6 0.1361 

    -0.0111

    0.0452

    0.0277

    0.0581

    0.0313

    0.1021

    0.1652

    -0.0237

    -0.0581

    -0.0077

    -0.0401

    -0.0589

    0.1335

    0.0693

    -0.0391

    -0.0086

    0.0196

    0.0432

    0.307

    -0.0498

    -0.0369

    -0.0272

    0.0286

    -0.1088

    -0.1338

    0.0913

    0.011

    0.0581

    0.1043

    0.0876

    0.0617

    0.0877

    0.14

    -0.0369

    0.0473

    0.1054

    0.0249

    0.1082

    0.048

    0.068

    0.0654

    0.1536

    -0.0749

    0.0473

    -0.0178

    -0.0291

    -0.1465

    0.0194

    0.0663

    -0.0022

    0.0854

    0.0127

    0.0914

    0.0604

    -0.0099

    0.0119

    -0.008

    -0.0605

    0.0746

    0.0596

    0.048

    0.0378

    0.0813

     

    (i) Monthly returns on equity shares of Infosys and Hamdard for a period of 2 years (w.e.f. October 2006 to September 2008) along with portfolio of S&P CNX NIFTY.

    (ii) Return on 364-days treasury bills issued by Government of India for the period 2007-08 is 5.15 per cent per annum and 0.419 per month. This rate is to be used as a proxy for risk-free rate of return.

    (iii) Debt-equity ratio (based on the average of 2004 to 2008) is 1.6 per cent for Wipro and 31.4 per cent for Dabur.

    (iv) Corporate tax is 35 per cent. 

     Question No.

    1. Compute the Beta and interpret it for Prashant. Examine different circumstances with analysis of data.

     

     

     

     

    Assignment C

    1 .India´s largest stock exchange is 

    Options          

    1. NSE
    2. CSE
    3. TSE
    4. ASE

     

     

    Question No.  2         

    Stock exchanges have roles in the economy           

    Options                      

    1. single
    2. dual
    3. multiple
    4. triple

     

     

     

    Question No.  3         

    There is usually…….compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange.       

    Options                      

    1. no
    2. always
    3. once
    4. none of the above

     

     

    Question No.  4         

    Buyers and sellers come together to trade ……...specific hours on business days.        

    Options                      

    1. once
    2. never
    3. during
    4. after

     

     

     

    Question No.  5         

    If a particular company is traded on an exchange, it is referred to as ……....   

    Options                      

    1. listed
    2. non listed
    3. traded
    4. non traded

     

     

    Question No.  6         

    When people draw their savings and invest in shares, it leads to a more …………. allocation of resources           

     Options                     

    1. Final
    2. rational
    3. equitable
    4. irrational

     

     

     

    Question No.  7         

    Exchanges ……... rules and regulations on the firms and brokers that are involved with them.         

     Options                     

    1. DENY
    2. impose
    3. equate
    4. clear

     

     

    Question No.  8         

    Investing in shares is open to ……... the large and small stock investors

    Options                      

    1. neither
    2. either
    3. only
    4. both

     

     

    Question No.  9         

    Companies that are not listed on a stock exchange are sold ……..          

    Options                      

    1. OTC
    2. PTC
    3. STC
    4. WTC

     

     

    Question No.  10       

    An exchange is an institution, organization, or association which hosts a market where stocks, bonds, options and futures, and commodities are traded.              

    Options                      

    1. TRUE
    2. FALSE
    3. can’t say
    4. inadequate information

     

     

    Question No.  11       

    Listing requirements are the set of conditions imposed by a given ……... upon companies that want to be listed on that exchange         

    Options                      

    1. stock exchange
    2. SEBI
    3. RBI
    4. GOI

     

     

    Question No.  12       

    Stock exchanges originated as ……. organizations, owned by its member stock brokers.        

    Options                      

    1. single
    2. partnership
    3. mutual
    4. corporation

     

     

     

    Question No.  13       

    Some exchanges are physical locations where transactions are carried out on a ……….. floor, by a method known as open outcry          

    Options                      

    1. trading
    2. marble
    3. cement
    4. mud

     

     

    Question No.  14       

    Actual trades are based on an auction market model where a potential buyer bids a specific price for a ……...and a potential seller asks a specific price for the stock.      

    Options          

    1. game
    2. stock
    3. colour
    4. system

     

     

    Question No.  15       

    The stocks are listed and ,……….on stock exchanges        

    Options                      

    1. traded
    2. not traded
    3. analysed
    4. studied

     

     

    Question No.  16       

    When a company is delisted, it is a serious sign of financial or managerial trouble and generally causes the stock price to …………...     

    Options                      

    1. increase
    2. stay stable
    3. fall
    4. none of the above

     

     

    Question No.  17       

    The exchanges provide real-time trading information on the listed securities, facilitating price discovery.           

    Options                      

    1. cost
    2. price
    3. number
    4. quality

     

     

     

    Question No.  18       

    Companies that have shares traded OTC are usually …………... and riskier     

    Options                      

    1. clear
    2. equal
    3. bigger
    4. smaller

     

     

     

    Question No.  19       

    The ……... monitors the transactions to avoid illegal activity and / or stock price manipulation.        

    Options                      

    1. NASD
    2. RBI
    3. SEBI
    4. GOI

     

     

    Question No.  20       

    The NASDAQ is a …... listed exchange, where all of the trading is done over a computer network   

    Options                      

    1. Real
    2. contemporary
    3. only
    4. virtual

     

     

     

    Question No.  21       

    The ……….. that an exchange provides affords investors the ability to quickly and easily sell securities.            

    Options                      

    1. clarity
    2. solvency
    3. liquidity
    4. profitability

     

     

     

    Question No.  22       

    The price of shares and other assets is an important part of the dynamics of …. activity

    Options                      

    1. social
    2. economic
    3. personal
    4. demographic

     

     

     

    Question No.  23       

    Stock exchange "specialists" play a ………. role in the process, helping to keep an orderly market by deftly matching buy and sell orders.          

    Options                      

    1. crucial
    2. small
    3. negligible
    4. unclear

     

     

     

    Question No.  24       

    Exchanges also act as the………... for each transaction   

    Options                      

    1. clearinghouse
    2. storehouse
    3. greenhouse
    4. none of the above

     

     

     

    Question No.  25       

    Stock exchanges are……... of a global market for securities.      

    Options                      

    1. part
    2. complete
    3. not required
    4. necessary

     

     

     

    Question No.  26       

    Stock valuation models are methods to value ……..         

    Options                      

    1. state
    2. system
    3. slide
    4. stock

     

     

     

    Question No.  27       

    ……….is probably the most common model that you ever heard when it comes to stock valuation   

    Options                      

    1. DCF
    2. NDCF
    3. PDF
    4. CDF

     

     

     

    Question No.  28       

    The discounted rate normally includes a risk …….. Which is commonly based on the capital asset pricing model?           

    Options                      

    1. discounting
    2. premium
    3. both of the above
    4. none of the above

     

     

     

    Question No.  29       

    Some feel that if the stock is listed in a well organized stock market, with a……….. volume of transactions, the listed price will be close to the estimated fair value     

    Options                      

    1. large
    2. small
    3. negligible
    4. clear

     

     

     

    Question No.  30       

    Fundamental analysis of a business involves analyzing its financial statements and health, its management and ….. advantages, and its competitors and markets.    

    Options                      

    1. class
    2. system
    3. competitive
    4. industry

     

     

     

    Question No.  31       

    Fundamental analysis is performed on historical and present data, but with the goal of making …..forecasts.  

    Options                      

    1. social
    2. financial
    3. environment
    4. none of the above

     

     

     

    Question No.  32       

    The discounted cash flow (DCF) method, involves …….. of the profits 

    Options                      

    1. discounting
    2. compunding
    3. both of the above
    4. none of the above

     

     

     

    Question No.  33       

    Investors may use fundamental analysis within different …..management styles.        

    Options                      

    1. portfolio
    2. stock
    3. shares
    4. debentures

     

     

     

    Question No.  34       

    Technical analysis is a security analysis discipline for forecasting the……..direction of prices through the study of past market data, primarily price and volume.  

    Options                      

    1. current
    2. past
    3. future
    4. all of the above

     

     

     

     

    Question No.  35       

    Technical analysts may employ models and trading rules based on price and volume transformations, such as the relative strength index, ……. averages, regressions           

    Options                      

    1. moving
    2. still
    3. no
    4. none of the above

     

     

     

    Question No.  36       

    In addition to fundamental economic criteria, ………….. Criteria also have to be taken into account market-based valuation.      

    Options                      

    1. personal
    2. company
    3. industry
    4. market

     

     

    Question No.  37       

    Technical analysis ….. that prices already reflect all such influences before investors are aware of them           

    Options                      

    1. denies
    2. alleges
    3. holds
    4. none of the above

     

     

     

    Question No.  38       

    The term business cycle (or economic cycle) refers to economy-wide fluctuations in production or ………….activity over several months or years.     

    Options                      

    1. social
    2. economic
    3. peresonal
    4. demographic

     

     

    Question No.  39       

    Economic theory has moved towards the study of ………. fluctuation rather than a ´business cycle 

    Options                      

    1. social
    2. economic
    3. peresonal
    4. demographic

     

     

    Question No.  40       

    Managing economic policy to smooth out the cycle is a ……….. task in a society with a complex economy.           

    Options                      

    1. clerical
    2. easy
    3. simple
    4. difficult

     

     

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