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    BCF 401 Investment Analysis & Portfolio MNGT

    Uploaded by

    Mulwa Muthoka
    Management of portfolios

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    BCF 401 Investment Analysis & Portfolio MNGT

    Uploaded by

    Mulwa Muthoka
    8 views3 pages
    Management of portfolios

    Original Title

    BCF 401 Investment Analysis & Portfolio Mngt

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    © © All Rights Reserved

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    PDF, TXT or read online from Scribd

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    Management of portfolios

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    8 views3 pages

    BCF 401 Investment Analysis & Portfolio MNGT

    Uploaded by

    Mulwa Muthoka
    Management of portfolios

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    MURANG’A UNIVERSITY OF TECHNOLOGY

    SCHOOL OF BUSINESS AND ECONOMICS


    DEPARTMENT OF COMMERCE

    UNIVERSITY ORDINARY EXAMINATION

    2018/2019 ACADEMIC YEAR


    FOURTH YEAR FIRST SEMESTER EXAMINATION FOR, BACHELOR OF
    COMMERCE

    BCF 401 – INVESTMENT ANALYSIS AND PORTFOILIO MANAGEMENT

    DURATION: 2 HOURS

    DATE:
    TIME:

    Instructions to candidates:

    1. Answer question One and Any Other Two questions.


    2. Mobile phones are not allowed in the examination room.
    3. You are not allowed to write on this examination question paper.

    Page 1 of 3
    SECTION A: ANSWER ALL QUESTIONS IN THIS SECTION

    QUESTION ONE (30 MARKS)


    a) Investors should have diverse investment strategies/approaches with the primary aim of
    achieving superior performance. Discuss any four investment strategies/approaches that
    can be used to make investment decisions (8 marks)
    b) Explain any four applications of Capital Asset Pricing Model (CAPM) (8 marks)
    c) Explain any four risks associated with a bond (8 marks)
    d) A research study has stated that the rate of return of ABC Ltd due to capital appreciation
    and dividend after making adjustment for the outflow is 16.27% for the period 2015-
    2016. It is assumed that the return will continue to grow at this rate for another four
    years. The recent dividend paid by the company to its shareholders is sh 4, and the
    earning per share (EPS) at the end of 2016 is sh 35, and price earnings ratio (P/E) is sh
    4.80. If an investor wants to buy and hold the ABC share for another four years, what
    would be the ideal price if his required rate of return is 20%? The price is sh 167 on 31st
    December 2016. (6 marks)

    SECTION B – ANSWER ANY TWO QUESTIONS IN THIS SECTION


    QUESTION TWO (20 MARKS)
    a) Explain five main features that characterize a bond (10 marks)
    b) Mabati Ltd share price on 1st April 2015 was sh 1271.10, and the price on 15th March
    2016 was sh 1,341.90. The dividend received was sh 7.50.
    i. What is the holding period of return? (4 marks)
    ii. Calculate the dividend yield (2 marks)
    iii. Calculate the capital gain yield (4 marks)

    QUESTION THREE (20 MARKS)


    a) The stock market is an integral part of the economy and the level of economic activity
    will have an influence on the performance of stock prices. Discuss any five
    macroeconomic factors that affect stock prices (10 marks)
    b) Asad is considering buying a sh 1,000 par value bond bearing a coupon rate of 11% that
    matures after five years. He wants a minimum yield to maturity of 15%. The bond is
    currently sold at sh 870. Should he buy the bond? (5 marks)
    c) The common stock of bulls corporation is currently selling for sh 70 per share. Dividend
    per share has grown from sh 2 to the current level of sh 6 over the past ten years, and this
    dividend growth is expected to continue in future. What is the required rate of return of
    Bulls Corporation? (5 marks)

    Page 2 of 3
    QUESTION FOUR (20 MARKS)
    a) Discuss three assumptions of technical analysis (6 marks)
    b) Distinguish between fundamental analysis and technical analysis (6 marks)
    c) A security analyst has estimated the return of two firms A and B for the coming year,
    depending upon their macroeconomic factors and other estimations. He has assigned
    equal probabilities to all possible outcomes. The information is as shown below
    Economic stage Probability Return of A Ltd (%) Return of B Ltd (%)
    1 0.2 -22.31 93.29
    2 0.2 54.90 -59.36
    3 0.2 -28.18 -69.99
    4 0.2 68.98 69.04
    5 0.2 3.60 3.75
    i. Determine the expected rate of return for A and B respectively (2 marks)
    ii. Determine the standard deviation of A and B respectively (2 marks)
    iii. Calculate the risk of the portfolio comprising of A and B (2 marks)
    iv. Determine the proportion to be invested in each firm for optimum portfolio
    (2 marks)

    Page 3 of 3

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