BBA/B.Com Investment Analysis and Portfolio Management APRIL 2025

Description

Investment Analysis and Portfolio Management

April 2025 Examination

 

 

1. Riya is an aspiring entrepreneur who has recently come up with a promising idea for a tech startup. However, she faces a major hurdle – raising enough funds to bring her vision to life. After exploring various options, Riya decides to approach the capital market to seek funding. She begins researching how the capital market works and realizes that it can play a vital role in the growth of her startup. Highlights the functions of capital market plays in the financial system. (10 Marks)

Ans 1.

Introduction

The capital market plays a fundamental role in the financial system by facilitating the movement of funds from investors to businesses, enabling economic growth and development. For an aspiring entrepreneur like Riya, the capital market offers a structured avenue to secure funding, which is essential for transforming her tech startup idea into reality. Unlike traditional financing options such as bank loans, capital markets provide access to a larger pool of investors

 

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2. Arvind is a financial analyst working at a leading investment firm. Arvind decides to use the Capital Asset Pricing Model (CAPM) to calculate the expected return on the stock. While working on the model, Arvind’s senior warnings about the limitations of CAPM, especially in real-world applications. Although CAPM is a widely used model, it comes with certain assumptions that might not always hold true in the actual market. Describe all those limitations which Arvind has to keep in mind. (10 Marks)

Ans 2.

Introduction

The Capital Asset Pricing Model (CAPM) is a fundamental financial model used to determine the expected return of an asset based on its systematic risk. Developed by William Sharpe, CAPM establishes a relationship between an asset’s expected return and its beta, which measures the asset’s sensitivity to

 

 

3a. Mr. Aditya purchase 500 shares of XYZ co. at Rs.100 each. During the year company declare a dividend 50 per share. At the end of year Mr. Aditya sale, the shares at Rs.200 per share. Calculate total return at the end of the year.   (5  Marks)

Ans 3a.

Introduction

Investing in the stock market offers opportunities for capital appreciation and dividend income, which together contribute to an investor’s total return. Mr. Aditya’s investment in XYZ Co. is a prime example of how stock market returns are generated through both price appreciation and dividend payments. Understanding total return is crucial for evaluating the profitability

 

1. Ajay has recently started investing in the stock market. He has been reading a lot about the potential of earning high returns, but he is also keen on understanding the various costs associated with trading stocks. Suppose you are good friend of Ajay & investing in the stock market from last few years. Explain him about the different types of transaction costs involved while trading. (5 Marks)

Ans 3b.

Introduction

Investing in the stock market comes with potential returns, but it also involves various transaction costs that can impact an investor’s net profits. Ajay, a new investor, is keen on understanding these costs to make informed trading decisions. As an experienced investor, it is essential to explain to him the