Investment Analysis (FINA350)

Instructions:

Choose any 12 questions from the following but remember at least one question must be from each chapter.

Copy and paste material will not be accepted.

Follow Text Book

Frank K. Reilly, Keith C. Brown: Investment Analysis and Portfolio Management (latest edition), South-Western College Publication. ISBN # 978-0324656121

Ch-1

Briefly discuss the five fundamental factors that influence the risk premium of an investment.

Ch-2

Discuss how an individual?s investment strategy may change as he or she goes through the accumulation, consolidation, spending, and gifting phases of life.

Ch-4

Define market and briefly discuss the characteristics of a good market.

Define the third market. Give an example of a third-market stock.

Define the fourth market. Discuss why a financial institution would use the fourth market.

Briefly define each of the following terms and give an example:

Market order

Limit order

Short sale

Stop loss order

Ch-7

Draw a properly labeled graph of the Markowitz efficient frontier. Describe the efficient frontier in exact terms. Discuss the concept of dominant portfolios and show an example of one on your graph.

Assume you want to run a computer program to derive the efficient frontier for your feasible set of stocks. What information must you input to the program?

Why are investors? utility curves important in portfolio theory?

Ch-8

Explain why the set of points between the risk-free asset and a portfolio on the Markowitz efficient frontier is a straight line.

Draw a graph that shows what happens to the Markowitz efficient frontier when you combine a risk free asset with alternative risky asset portfolios on the Markowitz efficient frontier. Explain this graph.

Ch-9

Multifactor models of security returns have received increased attention. The arbitrage pricing theory

(APT) probably has drawn the most attention and has been proposed as a replacement for the capital asset pricing model (CAPM).

Briefly explain the primary differences between the APT and the CAPM.

Identify the four systematic factors suggested by Roll and Ross that determine an asset?s riskiness.

Explain how these factors affect an asset?s expected rate of return.

Ch-16

Discuss some disadvantages of technical analysis.

If the mutual fund cash position were to increase close to 10 percent, would a technician consider this cash position bullish or bearish? Give two reasons why the technical analyst would think this way.

Ch-20

How would you explain to a casual observer why high-yield bond returns are more correlated to common stock returns than to investment-grade bond returns?

What are the advantages and difficulties of a cash-matched dedicated portfolio?

Describe the two components of interest rate risk.

What is meant by bond portfolio immunization?

If the yield curve were flat and did not change, how would you immunize your portfolio?

Investment Analysis (FINA350) Instructions: Choose any 12 questions from the following but remember at least one question must be from each chapter. Copy and paste material will not be accepted. Follow Text Book Frank K. Reilly, Keith C. Brown: Investment Analysis and Portfolio Management (latest edition), South-Western College Publication. ISBN # 978-0324656121 Ch-1 Briefly discuss the five fundamental factors that influence the risk premium of an investment. Ch-2 Discuss how an individual's investment strategy may change as he or she goes through the accumulation, consolidation, spending, and gifting phases of life. Ch-4 Define market and briefly discuss the characteristics of a good market. Define the third market. Give an example of a third-market stock. Define the fourth market. Discuss why a financial institution would use the fourth market. Briefly define each of the following terms and give an example: Market order Limit order Short sale Stop loss order Ch-7 Draw a properly labeled graph of the Markowitz efficient frontier. Describe the efficient frontier in exact terms. Discuss the concept of dominant portfolios and show an example of one on your graph. Assume you want to run a computer program to derive the efficient frontier for your feasible set of stocks. What information must you input to the program? Why are investors' utility curves important in portfolio theory? Ch-8 Explain why the set of points between the risk-free asset and a portfolio on the Markowitz efficient frontier is a straight line. Draw a graph that shows what happens to the Markowitz efficient frontier when you combine a risk free asset with alternative risky asset portfolios on the Markowitz efficient frontier. Explain this graph. Ch-9 Multifactor models of security returns have received increased attention. The arbitrage pricing theory (APT) probably has drawn the most attention and has been proposed as a replacement for the capital asset pricing model (CAPM). Briefly explain the primary differences between the APT and the CAPM. Identify the four systematic factors suggested by Roll and Ross that determine an asset's riskiness. Explain how these factors affect an asset's expected rate of return. Ch-16 Discuss some disadvantages of technical analysis. If the mutual fund cash position were to increase close to 10 percent, would a technician consider this cash position bullish or bearish? Give two reasons why the technical analyst would think this way. Ch-20 How would you explain to a casual observer why high-yield bond returns are more correlated to common stock returns than to investment-grade bond returns? What are the advantages and difficulties of a cash-matched dedicated portfolio? Describe the two components of interest rate risk. What is meant by bond portfolio immunization? If the yield curve were flat and did not change, how would you immunize your portfolio