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Explain the following terms: a. Security b. Investment c. Speculation d. Risk e. Portfolio Distinguish between: a. Investment & Speculation b. Risk & Return What is a portfolio? What are the objectives of construction of portfolio? Explain the considerations to be taken into account while selecting a suitable investment avenue? State the different investment avenues for investment? What is risk? How do you distinguish between systematic and unsystematic risk? The following information is available about 2 securities A & B. Particulars Expected Return A 10% 15% 0.6 0.7 B 12% 10% 0.4 0.98

Standard Deviation of Expected Return Correlation Coefficient with the market Beta 8. Year 1 2 3 4 5 9.

Which of the security is more risky and why? From the following information, calculate the Beta of a security Return on Security (%) 10 12 15 10 8 Return on Market Portfolio (%) 12 11 14 12 11

What will be the expected return on a portfolio composed of the following securities? Expected Return (%) 10 15 20 Proportion (%) 25 25 50 A B C

Security

What will be the expected return if the proportion of each security in the portfolio is 20, 30 & 50 respectively? 10. Mr. Shekhar has supplied you the following information regarding his investments. HL Ltd Return (%) 25 20 10 Probability 0.30 0.50 0.20 15 13 12 06 LT Ltd Return (%) Probability 0.20 0.30 0.40 0.10

He wants to invest INR 50000 in any one of the securities. Which security should be selected for his investment?