FIN630 Assignment # 2 Solution

Solution Assignment 02
FIN 630
Marks=10
What will be the relationship among coupon rate, current yield, and yield to
maturity for bonds selling at discounts from par?
Illustrate using the 8% (semiannual payment) coupon, 30-year maturity bond with
par value of Rs. 1,000 paying 60 semiannual payments of Rs 40 each assuming it is
selling at a yield to maturity of 10%.
Yield to maturity exceeds current yield, which exceeds coupon rate.
Take as an example the 8% coupon bond with a yield to maturity of 10% per year (5%
per half year). Its price is Rs. 810.71.
Po=Σ Ct/ (1+r)t + Par/(1+r)n
= Rs. 40 X Annuity factor (5%, 60) + Rs. 1,000 X PV factor (5%, 60)
= Rs. 757.17 + Rs. 53.54
= Rs. 810.71
and therefore its current yield is 80/810.71 = 0.0987 or 9.87%, which is higher than the
coupon rate but lower than the yield to maturity.

FIN630 Assignment # 1 Solution

Solution Assignment 01
FIN 630
Marks=20
In the following graph at each highlighted point of the Elliott wave theory you are
required to:
1. State the stock trend, and
2. Suggest the possible decision of the investor regarding buying, selling or
retaining of shares. (Marks=10+10)
Solution
Each highlighted point carries 2 marks
Wave 1
1. The stock makes its initial move upwards (stock trend)
2. This is usually caused by a relatively small number of people that all of the sudden
(for a variety of reasons real or imagined) feel that the price of the stock is cheap so
it’s a perfect time to buy (investor’s decision)
3. This causes the price to rise.
Wave 2
1. At this point enough people who were in the original wave consider the stock
overvalued and take profits (retention/sell) (investor’s decision)
2. This causes the stock to go down (stock trend)
3. However, the stock will not make it to its previous lows before the stock is considered
a bargain again.
Wave 3
1. This is usually the longest and strongest wave.
2. The stock has caught the attention of the mass public. More people find out about the
stock and want to buy it. (investor’s decision)
3. This causes the stock’s price to go higher and higher. (stock trend)
4. This wave usually exceeds the high created at the end of wave 1.
Wave 4
1. People take profits because the stock is considered expensive again. (retention/sell)
(investor’s decision)
2. The stock will go down (stock trend)
3. This wave tends to be weak because there are usually more people that are still
bullish on the stock and are waiting to “buy on the dips”.
Wave 5
1. This is the point that most people get on the stock, and is most driven by hysteria.
2. People start coming up with ridiculous reasons to buy the stock.(investor’s decision)
3. This is when the stock becomes the most overpriced.
4. The stock will go up (stock trend)
5. Contrarians start shorting the stock which starts the ABC pattern.

FIN630 Paper

FIN630 - Investment Analysis & Portfolio Management Start 10:00 to 11:00 26-05-2010 2nd SessionTotal Question: 32 Marks 46Total MCQS: 28 Marks 28Total Long Question: 4 Marks 18Question: 1 What is Means by the Term Net Asset Value (NAV)? Marks 3Question: 2 The Business Funcation, Business Cycle, Process what kind of Industries are Most Sensitive Indistrives? Two Example. Marks 5Question: 3 The Business Funcation, Business Cycle, Process what kind of Industries are Least Sensitive Indistrives? Two Example. Marks 5Question: 4 What Object of the Balance Sheet in the Fundamental Analysis? Marks 5