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    BBMF2063 Tutorial Questions - 202306-3

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    BBMF2063 Tutorial Questions - 202306-3

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    BBMF2063 Tutorial Questions - 202306-3

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    BBMF 2063 Investment and Financial Analysis

    Semester 1 (2020/2021)
    Tutorial 3

    True and False

    1. The capital market line (CML) indicates the required return for each portfolio risk level. ( )
    2. Beta is a measure of systematic risk and relates one security's return to another security's return.
    ( )
    3. In a declining market, a portfolio manager should attempt to increase the overall beta of the
    portfolio. ( )

    Essay Question

    1. Using data from Tutorial 2 Question 4, generate Beta of both stocks.

    2. How can security market line (SML) be used to identify over and undervalued securities?

    3. Suppose that the risk free rate of 6 percent, the market portfolio expected return and variance is
    8 and 7 percent respectively, and the covariance between Stock A and market return is 6
    percent.
    a. Calculate Stock A’s Beta.
    b. Calculate Stock A’s risk premium
    c. Calculate Stock A’s required rate of return

    4. Suppose that Public Bank Berhad (PBB) pays 10% of return, Treasury bill pays 3% and market
    return is 7%. If beta of PBB is 1.16, is PBB a good investment?

    5. Suppose that a mutual fund agent approaches you and promote a fund which allows you to
    withdraw money from your Employment Provident Fund (EPF) to invest. From the analysis of
    the agent, the fund expected to pay up to 11% return, and you know that EPF paid an average 6%
    return and treasury’s return fixed at 2.75%. Based on the discussion in this chapter and in your
    opinion, are you going to take the investment? Justify your answer

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