MBA KMBNFM01 Investment Analysis and Portfolio Management - Important Questions & Answers

Important Question & Answers: AKTU MBA 3rd Year KMBNFM01 Paper

Define Purchasing Power Risk? 

Purchasing Power Risk is also called as Inflation Risk. It is defined as the chance that the cash flows from an investment would lose their value in future because of a decline in its purchasing power due to inflation.  

Define Currency Risk? 

It refers to the potential risk of loss from fluctuating foreign exchange rates that an investor may face when he has invested in foreign currency or made foreign-currency-traded investments.

Define Bond? 

A bond is a type of debt security that represents a loan made from an investor to an issuer, such as a corporation, government, or other organizations. It is a type of fixed income security through which a Company acknowledges its obligation to repay the sum over a specified period of time, at a specified rate of interest. It is one of the methods of raising the loan capital of the Company. 

Bonds are traded in the securities market, meaning they can be bought and sold before their maturity. The bond's price in the secondary market fluctuates based on factors like interest rates, creditworthiness of the issuer, and overall market conditions.

Explain a Bull Market? 

A bull market occurs when securities are on the rise  for sustained periods, confidence is soaring. A bull market is happens when stock prices have gone up 20% or more from the previous low for a sustained period of time.

Explain a Bear Market? 

A Bear market occurs when securities fall for sustained periods. A Bear market is happens when stock prices fall  20% or more for a sustained period of time. It often occur in periods of economic slowdown and higher unemployment.

What is a Risk Premium? 

A risk premium is the investment return an asset is expected to yield in excess of the risk-free rate of return. It is the additional return an investor expects to receive from an investment that carries risk, compared to the return on a risk-free investment.

What is Portfolio Revision? 

Portfolio revision refers to the process of periodically reviewing and adjusting an investment portfolio to ensure it aligns with the investor's financial goals, risk tolerance, market conditions, and changing circumstances. It involves making changes to the portfolio's asset allocation, such as buying or selling securities, to optimize performance or mitigate risks.

What is Close Ended Mutual Fund? 

A close ended mutual fund is a type of mutual fund that issues a fixed number of shares through a single initial offerings (IPO) to raise capital for  its initial investments.

What is a Security Market Line? 

A security market line is a graph that shows the expected rate of return for a security in relation to its systematic, non-diversifiable risk. It is a visual representation of the capital asset pricing model (CAPM).

Explain the concept of Relative Strength? 

Relative strength (RS) is a measure of the price trend of a stock compared to its benchmark index or sectoral index.

RS > 1 indicates that the stock outperformed the market,

RS < 1 indicates that the stock underperformed the market, and 

RS = 1 indicates that the stock performed on par with the market

Define Price to Sales Ratio? 

Price to Sales Ratio is a financial metric that compares a company's stock price to its sales. It is a way to measure how much investors are willing to pay for each dollar of a company's sale. It is valuation metric for stocks.