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BBS 4th Year Fundamentals of Investment 2080 Questions Paper
Following are the Fundamentals of Investment 2080 Questions Paper.
1. Distinguish between investment and speculation.
2. Who is an issue manager? List any three functions of issue manager.
3. What is long purchase? Illustrate with an example.
4. What is the expected return on a stock with a beta of 1.15 a market risk premium of 6 percent and a risk free return of 5 percent?
5. Distinguish between cash dividend and stock dividend.
Also Read: BBS 4th Year Old Questions Paper PDF
6. Assume a share of stock is selling at Rs. 200 per share. You buy 100 shares of stock on margin today. If the initial margin is 60 percent and maintenance margin is 40 percent, compute the margin call price.
7. A well-known company has total assets of Rs. 400 million, total debt of Rs. 160 million, and Rs. 40 million of 10 percent preferred stock outstanding. If the company has 10,00,000 shares of common stock outstanding, what is the book value per share?
8. Explain why bank discount yield is lower than bond equivalent yield.
Also Read: BBS 4th Year Fundamentals of Investment Notes.
9. A bond has a Macaulay duration equal to 6 years and a yield to maturity of 9 percent. What is the percentage change in price of a bond if yield to maturity rises to 9.5 percent?
10. Write the meaning of derivative securities.
Also Read: TU BBS 4th year Syllabus & subjects.
Group “B”: Descriptive Answer Questions
Attempt any FIVE questions. [5*10 = 50]
11. What is investment? Explain different types of investments.
12. Assume that you sell short 500 shares of Nabil stock for Rs. 400 per share. The initial margin and maintenance margin requirements are 50 percent and 30 percent respectively.
- a. What is the initial value of debt and equity in your margin account?
- b. If the stock price increases to Rs. 450 per share, what will be the value of debt and equity in your margin account?
- c. Do you receive a margin call if the price of stock increases to Rs. 450?
- d. What will your rate of return be if Nabil stock is trading at Rs. 380?
Also Read: BBS 4th Year Old is Gold Pdf.
15 a and b
15. (a) City fund had average daily assets of Rs. 1800 million in the past year. The Fund sold Rs. 600 million and purchased Rs. 500 million worth of stock during the year.
- i) What was the portfolio turnover rate?
- ii) If City Fund’s expense ratio was 1.2 percent and the management fee was 0.8 percent, what were the total fees paid to the fund’s investment managers during the year? What were the other administrative expenses?
(b) Assume the average return on portfolio P was 35 percent and that of the market was 28 percent. The beta coefficient of portfolio P was 1.2 and that of the market was 1.0. Standard deviation of portfolio P and the market was 42 percent and 30 percent respectively. The T-bill rate during the period was 6 percent.
- i) Calculate the Treynor and Sharpe measures for both portfolio P and the market.
- ii) Briefly explain whether portfolio P underperformed, equated, or outperformed the market. Why these two measures may produce conflicting results?
Also Read:BBS 4th Year all subjects Notes.
16
16. Assume that risk free rate is currently 6 percent. The expected return on the average stocks in the market is 12 percent. You are evaluating the prospect of ABC stock which is currently paying Rs 20 per share in dividend. The stock has a beta coefficient of 1.5. Currently, the aggressive marketing campaign launched by the company will enhance its earnings significantly. As a result the growth rate of dividends is expected to be 20 percent for the next two year. After this period, the growth rate is expected to slow down to a normal rate of 5 percent indefinitely.
- a. Calculate the required rate of return on ABC stock.
- b. What is the expected dividends per share on ABC stock for next two years?
- c. At what price the stock is expected to sell at the end of year 2?
- d. What is the intrinsic value of this stock today?
- e. If the stock is currently trading in Rs. 260 per share, is the stock underpriced or overpriced? Would you prefer to buy the stock?
Also Read: BBS 4th Year Fundamentals of Investment Important Questions PDF.
Group “C”: Analytical Answer Questions.
Attempt any TWO questions. [2 *15 = 30]
17. What is fixed income security? Explain different types of fixed-income securities.
19. Assume that you are an aggressive bond trader and therefore want to speculate on interest rate swings. Market interest rates are currently 9 percent, but you expect the interest rates to fall to 7 percent within a year. You are thinking of buying either a 25- year, zero-coupon bond or a 20- year, 5.5 percent bond. Both bonds have Rs. 1000 par values and carry the same agency rating.
- a. If you want to maximize capital gain income, which of the two bonds should you select? Show your calculation.
- b. If you want to maximize total return from your investment, which of the two bonds should you select?
- c. Why did one bond provide better capital gains than the other?
Other Important Link
a. BBS 4th Year Proposal Sample PDF
b. BBS 4th-year project report pdf
