MS 44 Solved Assignment 2021-22

 
MS-44
Security Analysis and Portfolio Management

Course Code : MS-44

Course Title : Security Analysis and Portfolio Management

Assignment Code : MS-44/TMA/SEM-I/2021

Coverage : All Blocks

 

MS 44 Solved Assignment 2020-21 : All assignments are in PDF format which would be send on email/WhatsApp (9958676204)  just after payment…

Attempt all questions. All questions carry equal marks.

1. What is the significance of investment risk? Explain the various risks that may influence the investment risk.

Risk is defined in financial terms as the chance that an outcome or investment's actual gains will differ from an expected outcome or return. Risk includes the possibility of losing some or all of an original investment.

Quantifiably, risk is usually assessed by considering historical behaviors and outcomes. In finance, standard deviation is a common metric associated with risk. Standard deviation provides a measure of the volatility of asset prices in comparison to their historical averages in a given time frame.

Overall, it is possible and prudent to manage investing risks by understanding the basics of risk and how it is measured. Learning the risks that can apply to different scenarios and some of the ways to manage them holistically will help all types of investors and business managers to avoid unnecessary and costly losses.

Everyone is exposed to some type of risk every day – whether it’s from driving, walking down the street, investing, capital planning, or something else. An investor’s personality, lifestyle, and age are some of the top factors to consider for individual investment management and risk purposes. Each investor has a unique risk profile that determines their willingness and ability to withstand risk. In general, as investment risks rise, investors expect higher returns to compensate for taking those risks.1

 A fundamental idea in finance is the relationship between risk and return. The greater the amount of risk an investor is willing to take, the greater the potential return. Risks can come in various ways and investors need to be compensated for taking on additional risk. For example, a U.S. Treasury bond is considered one of the safest investments and when compared to a corporate bond, provides a lower rate of return. A corporation is much more likely to go bankrupt than the U.S. government. Because the default risk of investing in a corporate bond is higher, investors are offered a higher rate of return.2

Quantifiably, risk is usually assessed by considering historical behaviors and outcomes. In finance, standard deviation is a common metric associated with risk. Standard deviation provides a measure of the volatility of a value in comparison to its historical average. A high standard deviation indicates a lot of value volatility and therefore a high degree of risk.

Individuals, financial advisors, and companies can all develop risk management strategies to help manage risks associated with their investments and business activities. Academically, there are several theories, metrics, and strategies that have been identified to measure, analyze, and manage risks. Some of these include: standard deviation, beta, Value at Risk (VaR), and the Capital Asset Pricing Model (CAPM). Measuring and quantifying risk often allows investors, traders, and business managers to hedge some risks away by using various strategies including diversification and derivative positions.

Risk takes on many forms but is broadly categorized as the chance an outcome or investment's actual gain will differ from the expected outcome or return.

Risk includes the possibility of losing some or all of an investment.

There are several types of risk and several ways to quantify risk for analytical assessments.

Risk can be reduced using diversification and hedging strategies.

While it is true that no investment is fully free of all possible risks, certain securities have so little practical risk that they are considered risk-free or riskless.

Riskless securities often form a baseline for analyzing and measuring risk. These types of investments offer an expected rate of return with very little or no risk. Oftentimes, all types of investors will look to these securities for preserving emergency savings or for holding assets that need to be immediately accessible.

Examples of riskless investments and securities include certificates of deposits (CDs), government money market accounts, and U.S. Treasury bills.3 The 30-day U.S. Treasury bill is generally viewed as the baseline, risk-free security for financial modeling. It is backed by the full faith and credit of the U.S. government, and, given its relatively short maturity date, has minimal interest rate exposure.

2. What are Primary and Secondary markets? Explain the Principal steps involved in floating a Public Issue and discuss the SEBI guidelines for floating Initial Public Offering (IPO) with help of a care example.

3. Discuss the different measures of value for company valuation? Explain the various methods used to assess and measure future value of equity shares which are based on quantitative factors with suitable examples.

4. What is “Efficient Market Hypothesis”? Discuss the forms of Market Efficiency and explain the empirical tests used to determine the degree of efficiency in the stock markets.

MS 44 Solved Assignment 2020-21 : All assignments are in PDF format which would be send on email/WhatsApp (9958676204)  just after payment…

5. Compare and Contrast Capital Asset Pricing Model (CAPM) with Arbitrage Pricing Theory (APT). Which of the two is a better model for pricing risky assets and why, explain with reasons.

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