Description

Portfolio Management
June 2024 Examination
Q1. Mr Aditya is planning to invest in stock. Stock A’s maximum value is 500 & minimum
value is 300. Stock B’s maximum value is 700 & minimum value is 400. Suggest Mr. Aditya
which stock is more risky. (10 mark)
Ans 1.
Introduction:
In the realm of portfolio management, understanding the concept of risk is paramount as it
directly influences investment decisions. Risk, in financial terms, refers to the variability of
returns on an investment and is often associated with the uncertainty of achieving expected
returns. Assessing the risk of different investment options enables investors to make informed
choices aligned with their risk tolerance and financial goals. In this scenario, Mr. Aditya is
considering investing in two stocks, Stock A and Stock B, each characterized by its maximum and
minimum values. The determination of which stock carries more risk necessitates a
comprehensive analysis considering various risk metrics and factors.
Concept and application
Risk Assessment Methods:
1. Standard Deviation: Standard deviation is a statistical measure of the dispersion or
variability of a set of values. In the context of investments, it quantifies the extent of
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Q2. When the securities are issued first time by the issuing firm, it is executed in the
primary market. It is a systematic process and involves many parties. Elaborate the parties
in your own words. (10 mark)
Ans 2.
Introduction:
The primary market serves as the foundational arena where securities are issued for the first time
by the issuing firm, allowing companies to raise capital directly from investors. This market plays
a crucial role in the financial system, facilitating the transfer of funds from investors to the issuing
company. The process of issuing securities in the primary market is systematic and involves the
participation of various parties, each with distinct roles and responsibilities. Understanding the
dynamics of the primary market and the roles of its key players is essential for investors, issuers,
and other stakeholders to navigate this market successfully. Therefore, in this discussion, we will
explore the parties involved in the primary market and elucidate their contributions to the issuance
3a. Investment is a need for all individuals & firms. It is depending on investor’s
requirement. Every investor has different aim of investment. Every one need to protect their
future by saving from current income and these savings are used for investment. From
investor point of view what will be your purpose of investment. (5 mark)
Ans 3a.
Introduction:
Investment serves as a crucial aspect for both individuals and firms, catering to diverse needs and
objectives. As investors, individuals and organizations allocate their savings towards various
investment avenues based on their specific requirements and goals. Understanding the purpose of
investment from the investor’s perspective is essential in devising suitable strategies to meet their
financial aspirations and secure their future.
Concept and application
Investors pursue investment with a myriad of objectives tailored to their financial circumstances
b) Mr A purchase 100 shares of XYZ co. at Rs.10 each. During the year company declare a
dividend 5 per share. At the end of year Mr. A sale the shares at Rs. 20 per share. Calculate
total return at the end of the year. (5 mark)
Ans 3b.
Introduction:
Investors often assess the performance of their investments based on the total return, which
includes both capital gains and income generated. Understanding how to calculate total return
provides valuable insights into the profitability of an investment over a specific period. In this
scenario, Mr. A purchases shares of XYZ Co., receives dividends during the year, and eventually
sells the shares at a different price. Calculating the total return enables Mr. A to evaluate the