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Capital Market and Portfolio Management June 2020

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June 2020 NMIMS Assignment

Q1. Calculate the standard deviation and return of portfolio consisting of 60% of Security A and 40% of Security B.

TABLE BELOW

Year

Security A return(%)

Security B return(%)

2015

10

18

2016

12

15

2017

9

11

2018

10

9

2019

5

7

 

Q2. Calculate the return as per CAPM for each of the company’s stock, identify whether they are underpriced, overpriced or correctly priced and advise accordingly. Returns of T- Bill is 9%.

 

Stock

Expected Return

Beta

Titan

24%

1.8

Nestle

30%

1.5

Eicher Motors

12%

1.2

HDFC

25.9%

1.3

Sensex

22%

 

 

Q3. An investor was tracking SBI and HDFC mutual funds whose return and beta are as given below:

 

Observed Return

Beta

Portfolio SBI

18%

0.75

Portfolio HDFC

25%

1.25

 

Return on the market portfolio is 11%, while the risk-free return is 8%. Assume standard Deviation of the market to be 7%.

  1. Compute the Jensen index for each of the funds and comment which one is better.
  2. Compute the Treynor index for each of the funds and comment which one is better.

 

Previous Semester

APR 2020 NMIMS SOLUTION

Q1. The following data shows the return of Alpha Ltd and the Market:

TABLE GIVEN BELOW

YearReturn Alpha(%)Return Market (%)
11218
21617
31719
41418
51015

Calculate the Beta of Alpha Ltd and interpret. Explain the implications of different values of Beta.

Q2. Calculate the standard deviation and return of portfolio consisting of 60% of Security A and 40% of Security B. Assume correlation coefficient between stock A and stock B is 0.55. Interpret the benefit of portfolio over individual stock investment (in case of security A and B).

Security A and B return
Security A return and B

Q3. Observed Return and Beta of SBI Bluechip Fund and Franklin India Equity Fund for the year 2019 are as follows

Observed Return
Observed Return

Assume standard deviation of the market to be 8%, Return on Sensex 15% and the riskfree return to be 7%.

a. Compute the Jensen index for each of the funds and interpret the results.         (5 Marks)

b. Compute the Treynor index for each of the funds and interpret the results.         (5 Marks)