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Chapter 3
Portfolio Management
Calculation of Return
Q1. A mutual fund had a Net Asset Value (NAV) of Rs.50 at the beginning of the year. During the
year a sum of Rs.4 was distributed as income (dividend) besides Rs.3 as capital gains
distribution. At the end of the year NAV was Rs.55, calculate total return for the year.
Q2. Suppose the aforesaid Mutual Fund in the next year gives a dividend of Rs.5 as income
distribution and no capital gains distribution and NAV at the end of second year is Rs.50.
What is the return for the second year?
Q3. ABC Ltd., has the following dividend per share and the market price per share for the period
2000-2005:
Calculate the annual rate of return for last five years. How risky is the share?
Q4. The following information is available in respect of the return from security X under different
economic conditions:
Find out the expected return of the security and the risk associated with that.
Dividend per share
Market Price
Year
Rs.
Rs.
2000
2001
2002
2003
2004
2005
1.53
1.53
1.53
2.00
2.00
3.00
31.25
20.75
30.88
67.00
100.00
154.00
Return
Probability
Good
20%
16%
10%
3%
0.1
0.4
0.3
0.2

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Q5) 2006 November 4(c) (8 Marks)
2008 May 1(b) (8 Marks)
X Co., Ltd., invested on 1-4-2005 in certain equity shares as below :
Name of Co.
No. of shares
Cost (Rs.)
M Ltd.
N Ltd.
1,000 (Rs.100 each)
500 (Rs.10 each)
2,00,000
1,50,000
In September, 2005, 10% dividend was paid out by M Ltd. and in October, 2005, 30%
dividend paid out by N Ltd. On 313-2006 market quotations showed a value of Rs.220 and
Rs.290 per share of M Ltd. and N Ltd. respectively.
On 14-2006, investment advisors indicate (a) that the dividends from M Ltd. and N Ltd. for
the year ending 313-2007 are likely to be 20% and 35%, respectively and (b) that the
probabilities of market quotations on 31-3-2007 are as below :
Probability Factor
Price / Share of M Ltd.
Price / Share of N Ltd.
0.2
0.5
0.3
220
250
280
290
310
330
You are required to :
i) Calculate the average return from the portfolio for the year ended 31-3-2006;
ii) Calculate the expected average return from the portfolio for the year 2006-07; and
iii) Advise X Co. Ltd., of the comparative risk in the two investments by calculating the
standard deviation in each cases.
Portfolio Management
Q6) X Co. Ltd., invested on 1-4-2005 in certain equity shares as below :
Name of Co.
No. of shares
Cost (Rs.)
M Ltd.
N Ltd.
1,000 (Rs.100
each)
500 (Rs.10 each)
2,00,000
1.50,000
In September, 2005, 10% dividend was paid out by M Ltd. And in October, 2005,
30% dividend paid out by N Ltd. On 31-3-2006 market quotations showed a value of
Rs.220 and Rs.290 per share for M Ltd. And N Ltd. Respectively.
On 1-4-2006, investment advisors indicate (a) that the dividends from M Ltd. And N Ltd. For
the year ending 31-3-2007 are likely to be 20% and 35%, respectively and (b) that the
probabilities of market quotations on 31-3-2007 are as below:
Probability
factor
Price /share of M
Ltd.
Price / share of N Ltd.
0.2
0.5
0.3
220
250
280
290
310
330
You are required to:
i) Calculate the average return from the portfolio for the year ended 31-3-2006;

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Chapter 3 Portfolio Management Calculation of Return Q1. A mutual fund had a Net Asset Value (NAV) of Rs.50 at the beginning of the year. During the year a sum of Rs.4 was distributed as income (dividend) besides Rs.3 as capital gains distribution. At the end of the year NAV was Rs.55, calculate total return for the year. Q2. Suppose the aforesaid Mutual Fund in the next year gives a dividend of Rs.5 as income distribution and no capital gains distribution and NAV at the end of second year is Rs.50. What is the return for the second year? Q3. ABC Ltd., has the following dividend per share and the market price per share for the period 2000-2005: Calculate the annual rate of return for last five years. How risky is the share? Q4. The following information is available in respect of the return from security X under different economic conditions: Find out the expected return of the security and the risk associated with that. Q5) 2006 November 4(c) (8 Marks) 2008 May 1(b) (8 Marks) X Co., Ltd., invested on 1-4-2005 in certain equity shares as below : Name of Co. No. of shares Cost (Rs.) M Ltd. N Ltd. 1,000 (Rs.100 each) 500 (Rs.10 each) 2,00,000 1,50,000 In September, 2005, 10% dividend was paid out by M Ltd. and in October, 2005, 30% dividend paid out by N Ltd. On 31—3-2006 market quotations showed a value of Rs.220 and Rs.290 per share of M Ltd. and N Ltd. respectively. On 1—4-2006, investment advisors indicate (a) ...
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