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# MGT411 Assignment#02 Solution & Discussion Due Date: 02-06-2011

Semester “Spring 2011”
“Money & Banking (MGT411)”
Assignment No. 02 Marks: 20

Important Tips

1. This Assignment can be best attempted from the knowledge acquired after watching video lecture no. 1 to lecture no. 25 and reading handouts as well as recommended text book).

Schedule

Opening Date and Time

May 27 , 2010 At 12:01 A.M. (Mid-Night)

Due Date and Time

June 02 , 2010 At 11:59 P.M. (Mid-Night)

Note: Only in the case of Assignment, 24 Hrs extra / grace periodafter the above mentioned due date is usually available to overcome uploading difficulties which may be faced by the students on last date. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.

Question # 1 (Marks 8)
A portfolio of Rs. 1,000 entitles the investor to receive dividend of Rs. 150 at the end of year 2011. Expected future sale price at the end of year is Rs. 998. If the investor plans to sell the stock in the market after holding it for one year, what will be the holding period return for one year on this portfolio(in terms of percentage)?

Question # 2 (Marks 8)
Find the variance and standard deviation for the stock of a newly listed public limited company purchased at Rs. 1,000. While making this investment there are 50% chances that the price of investment will fall to Rs. 900 and 50% chances are that it will rise to Rs. 1200 after six months.

Question # 3 (Marks 4)
In stock market XYZ company is offering 16% annual return on bonds, however,Treasury Bills are providing 7% annual return. Calculate the risk premium if an investor invest in XYZ company.

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See the attached file for MGT411 Assignment#02 Solution Spring 2011
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One more idea solution of MGT411 Assignment#02 Spring 2011

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See the one more idea solution see the attached file please MGT411 Assignment no 2 idea solution spring 2011
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Thanks a lot.......
thanks tariq bhai it was the help that i need
Question # 1:-
Holding 1 year return =

= 0.13
=13%

Question # 2:-
Expected Value
(900*1/2) + (1200 * 1/2) = 1050

Subtract expected Value form each possible pay offs
900-1050 = -150
1200-1050 = 150

Square each of results
(-150)^2 = 22500
(150)^2 = 22500

Multiply each result time ties probability and adds up the result
= ½ * 22500 + ½ * 22500
= 22500

Variance = 22,500

Standard deviation = square rout of variance

S.D=150

Question # 3:-

Risk premium = Risky return – Risk free return

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