Security Analysis and Portfolio Management essay

Describe the money market/capital market – features and its composition. Answer. Money Market – Features and Composition The money market exists as a result of the interaction between the suppliers and demander of short-term funds (those having a maturity of a year or less). Most money market transactions are made in marketable securities which are short-term debt instruments such as T-bills and commercial paper. Money (currency) is not actually traded in the money markets. These crudities traded in the money market are short-term with high liquidity and low-risk; therefore they are close to being money.

Money market provides investors a place for parking SQ. Risk is the likelihood that your investment will either earn money or lose money. Explain the factors that affect risk. Mr.. Rural invests in equity shares of Wiper. Its anticipated returns and associated probabilities are given below: Return -15 -10 5 10 15 20 30 Probability 0. 05 0. 10 0. 15 0. 25 0. 30 You are required to calculate the expected ROR and risk in terms of standard deviation. (Explanation of all the 4 factors that affect risk, Calculation of expected ROR and risk in terms of standard deviation) Answer. Factors that affect risk

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Business risk: This is the possibility that the company holding your money will not pay the interest or dividend due, or the principal amount, when your bond matures. This may be caused by a variety of factors like heightened competition, emergence of new technologies, development of substitute products, shifts in consumer SQ. Explain the business cycle and leading coincidental & lagging indicators. Analyses the issues in fundamental analysis. Answer. Business cycle and leading coincidental and lagging indicators All economies experience recurrent periods of expansion and contraction.

This recurring pattern of recession and recovery is called the business cycle. The business cycle consists of expansionary and recessionary periods. When business activity reaches a high point, it peaks; a low point on the cycle is a trough. Troughs represent the end of a recession and the beginning of an expansion. Peaks represent the end of an expansion and the beginning of a recession. In the expansion phase, business activity is growing, production and demand SQ. Discuss the implications of MME for security analysis and portfolio management. Answer. Implications for active and passive investment

Proponents of the efficient market hypothesis often advocate passive as opposed to active investment strategies. Active management is the art of stock-picking and market-timing. The policy of passive investors is to buy and hold a broad-based market index. Passive investors spend neither on market research nor on frequent purchase and sale of shares. However, passive strategies may be tailored to meet individual investor SQ. Explain about the interest rate risk and the components in it. An investor is considering the purchase of a share of EX. Ltd. If his required rate of return is 10%, the year-end expected dividend is RSI. ND year-end price is expected to be RSI. 24, Compute the value of the share. Answer. Interest Rate Risk: With the passage of time, interest rate changes in the market. The cash flows from a bond (coupon payments and principal repayment) however, remain fixed. As a result, the value of a bond fluctuates. Thus interest rate risk arises because the changes in the market interest rates affect the value of the bond. The return on a bond comes from coupons payments, the interest earned from re-investing coupons (interest on SQ. Elucidate the risk and returns of foreign investing. Analyze international listing. Answer.

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