UNIVERSITI TEKNOLOGI MARA

FINAL ASSESSMENT

COURSE : INVESTMENT AND PORTFOLIO ANALYSIS

COURSE CODE : FIN552
EXAMINATION : FEBRUARY 2021
TIME : 2 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of three (3) questions.

2. Write ALL questions in an A4 sized paper. Start each answer on a new page.

3. Answer ALL questions in English.

4. Please check to make sure that this examination pack consists of:

i) the Question Paper

ii) the Final Assessment Declaration Fom – provided by the Faculty
Question 1

a) A fund manager foresees that the Treasury Bills rate is 4 percent and the followings
are the returns for four (4) stocks:

Stocks Beta Estimated rate

of return

A 1.5 16

B 1.8 20

C 0.6 8

D 2.0 12

KLCI 1 12

Calculate the value of each stock using the Capital Asset Pricing Model and explain
your investment decision. (14 marks)

b) ABC Company plans to get extra fund and considering a stock in the market. The stock
has an expected return of 14 percent, with the beta of the stock is 2 and the risk-free
rate is 3 percent. Calculate the market risk premium.
(6 marks)

Question 2
a) You are attempting to construct an optimum portfolio. Assume that the T-bill rate is 5
percent and market variance is 10 percent. The securities identified below are under
review.

Securities Expected return(percent) Residual variance Beta

A 10 14 0.8

B 9 18 1.2

C 17 25 1.8

D 13 20 1.4
E 11 16 1.0

F 14 22 1.6

Calculate the optimum portfolio. (17 marks)

b) Calculate how much amount you will invest in each security if you were given RM 5
million for your initial investment. (3 marks)
Question 3
Samanah Mutual is a registered fund management company that focusing on the international
portfolio investment. For financial year ended December 2020, the fund managers are
evaluating the performance of the company’s unit trust funds. The information of the funds are
tabulated as follows:

Funds Average Return (%) Beta Standard Deviation (%)

ASEAN 13 1.2 16
GLOBAL 17 0.9 14
FAR-EAST 12 0.6 10
The Market 15 1.0 12
Treasury bills = 6%
Based on the information above,
a) Compute the above portfolios by using Sharpe, Treynor, and Jensen Index and identify
under-performed and over-performed portfolio based on the market performance.
(14 marks)

b) Based on your answers in (a) above, identify the portfolio with the worst performance.
(3 marks)

c) By using Jensen’s alpha performance measurement, arrange the portfolio from the
best-managed to the least-managed.
(3 marks)

END OF QUESTIONS