Beta of Pragati Ltd is 1.55. The market rate of return is 15%. The risk free

1
 Capital Market and Portfolio
Managementinfo_at_answersheets.in91 95030-94040
2

•  Capital Market and Portfolio Management
• Question1
• Mr. Lalawani wants to invest in share
  market. Specifically, he is interested in the
  securities of Power Sector. He strongly believes
  that performance of any entity is significantly
  related to the general industry to which the
  entity belongs and also to the economic
  environment. Discuss the nature and type of
  analysis Mr. Lalwani will pursue so as to get the
  desired outcome. (10 Marks)
•  

3

• Question 2
• Mr. Anand wants to determine in which, out
  of the two securities he should invest in. He
  already did the task of forecasting the returns
  on both of these securities as mentioned below.
  You, being the financial research analyst advise
  him on these securities.
•  

4

• Question 3
• Beta of Pragati Ltd is 1.55. The market
  rate of return is 15. The risk free rate of
  return is 8 .
• a. Compute the expected return based on CAPM,
  explaining all the components of the CAPM Model
  (5 Marks)
• b. Suppose, the risk premium on the market goes
  up by 3.5 points do you think that the expected
  return on the stock of the above company will
  change? Calculate and elaborate. (5 Marks)
•  

5

• www.answersheets.in
• info.answersheets_at_gmail.com
• info_at_answersheets.in
• 91 95030-94040