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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).

2. Video lectures can be downloaded for free fromhttps://www.youtube.com/vu.
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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Replies to This Discussion

See the attached file for MGT411 Assignment#02 Solution Spring 2011
Attachments:

One more idea solution of MGT411 Assignment#02 Spring 2011

See the attached file please

Attachments:
See the one more idea solution see the attached file please MGT411 Assignment no 2 idea solution spring 2011
Attachments:
See the attached file for another idea solution of MGT411 assignment no 02 Solution 
Attachments:
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 
Risk premium= 16% - 7% 
Risk premium= 9%

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