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ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD
(Department of Business Administration)
*****
INVESTMENT AND SECURITIES MANAGEMENT (MBA-5540)
CHECK LIST
SEMESTER: AUTUMN 2010
This packet comprises following material:-
1. Text Book
2. Course Outline
3. Assignment No.1, 2.
4. Assignment Forms (two sets)
In this packet, if you find anything missing out of the above mentioned material, please contact at the address given below:
The Mailing Officer
Services Block No. 28
Allama Iqbal Open University
H-8, Islamabad.
Phone: 051-9057611-12
Course Coordinator
ALLAMA IQBAL OPEN UNIVERSITY ISLAMABAD
(Department of Business Administration)
1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE.
2. SUBMITTING ASSIGNMENTS BORROWED OR STOLEN FROM OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN “AIOU PLAGIARISM POLICY”.
Course: Investment and Securities Management (5540) Semester: Autumn 2010
Level: MBA Total Marks: 100
ASSIGNMENT No. 1
Note: All questions carry equal marks.
Q. 1 (a) Explain the terms investing and investments with examples. (10)
(b) Critically explain the broad two-step process involved in making investment decisions? (10)
Q. 2 (a) Discuss the difference between a negotiable certificate of deposit and certificates of deposit in relation with “Non-marketable Securities”? (10)
(b) Explain the advantages and disadvantages of treasury bonds with reference to Pakistani environment. (10)
Q. 3 (a) Critically discuss the various component of total returns. Can any of these components be Negative? Explain your view with arguments. (10)
(b) Calculate the future value of Rs.250 at the end of 5, 10, 20 and 30 years given an interest rate of 10 percent. Also calculate the present value of Re.1 to be received at the end of these same periods given the same interest rate? Write your comments in detail. (10)
Q. 4 (a) Explain Active and passive bond management strategies with examples. (10)
(b) Do Active and passive bond management strategies have any relationship or not. Explain your idea with examples. (10)
Q. 5 Explain the following terms and their importance with examples: (20)
(i) Primary markets
(ii) Islamic bonds
(iii) Stock market
(iv) Mutual funds.
Guidelines FOR ASSIGNMENT No. 1:
You should look upon the assignments as a test of knowledge, management skills, and communication skills. When you write an assignment answer, you are indicating your knowledge to the teacher:
§ Your level of understanding of the subject;
§ How clearly you think?
§ How well you can reflect on your knowledge & experience?
§ How well you can use your knowledge in solving problems, explaining situations, and describing organizations and management?
§ How professional you are, and how much care and attention you give to what you do?
To answer a question effectively, address the question directly, bring important related issues into the discussion, refer to sources, and indicate how principles from the course materials apply. You must also be able to identify important problems and implications arising from the answer.
For citing references, writing bibliographies, and formatting the assignment, APA format should be followed.
ASSIGNMENT No. 2
Total Marks: 100
This assignment is a research activity. You are required to obtain information from a business/commercial organization and prepare a report of about 1000 words on the issue allotted to you to be submitted to your teacher for evaluation.
You are required to select one of the following issues according to the last digit of your roll number. For example, if your roll number is P-3427180 then you will select issue # 0 (the last digit):-
ISSUES:
0. External factors affecting the investment decision process with reference to Pakistan.
1. Money market securities and its availability in business sector of Pakistan.
2. Globalization of securities market
3. Estimating returns and risks tools available for analyzing investment
4. Arbitrage pricing theory and its importance for the investment markets in Pakistan
5. Comparative study of present value approach and P/E ratio approach with reference to Pakistan
6. Options and its importance in investment
7. Convertible bonds and its applicability in Pakistan
8. Fundamentals analysis and its importance for investment
9. Capital market expectation and its review of Pakistani stock market.
WEIGHTAGE OF THEORY & PRACTICAL ASPECTS IN ASSIGNMENT # 2 AND WORKSHOP PRESENTATIONS
Assignment # 2 & workshop presentations are evaluated on the basis of theory & its applicability. The weightage of each aspect would be:
Theory: 60%
Applicability (practical study of the organization): 40%
INVESTMENT AND SECURITIES MANAGEMENT
(COURSE OUTLINE–5540)
UNIT 1 BACKGROUND
Background for Understanding Investment
• The nature of Investment
• Understanding the Investment Process
• External Factors Affecting the Decision Process
Types of Securities
• Organizing Financial Assets
• Non-Marketable Financial Assets
• Money Market Securities
• Capital Market Securities
• Other Types of Securities
UNIT 2 INVESTMENT ALTERNATIVES
Investment Companies
• Investing Indirectly through Investment Companies
• What is an Investment Company
• Types of Investment Companies
• Major Types of Mutual Funds
• Investing Indirectly
• Investment Company Performance
• The Future Prospects of Indirect Investing in Pakistan.
Securities Markets
• The Importance of Financial Markets
• The Primary Markets
• Secondary Markets
• Bond Markets
• The Changing Securities Markets
• Globalization of Securities Market
UNIT 3 TRADING OF SECURITIES AND RISK CONCEPTS
How Securities are Traded
• Brokerage Transactions
• How Orders Work
• Investor Protection in the Securities Markets
• Short Sales
Return and Risk Concepts
• Return
• Measuring Returns and Risk
• Estimating Returns and Risk
• The Return-Risk Relationship
UNIT 4 FIXED INCOME SECURITIES: ANALYSIS, VALUATION AND MANAGEMET
The Basics of Bonds
• Understanding Bonds
• The Bond Market
• Bond Returns and Risks
Bond Prices and Yields
• Bond Prices
• Bond Price Changes
• Bond Yields
• The Level of Market Interest Rates
Bond: Analysis and Strategy
• Why Buy Bonds
• Important Consideration in Managing a Bond Portfolio
• The Risk Structure of Interest Rates-Yield Spreads
• Bond Strategies and Management
UNIT 5 COMMON STOCK: ANALYSIS, VALUATION AND MANAGEMENT
Common Stocks
• Understanding Common Stocks
• The Stock Market
• Buying and Selling Stocks
• Common Stock Returns
• Common Stock Risks
• Historical Returns and Risk for Common Stock
• Why Investors Buy Stocks
Common Stock Valuation
• The Present Value Approach
• The P/E Ratio Approach
• Which Approach to Use
• Other Valuation Techniques
Common Stock: Analysis and Strategy
• Analyzing Common Stock
• Asset Allocation
• The Passive Strategy
• The Active Strategy
• Approaches for Analyzing and Selecting Stocks
• Framework for Fundamental Analysis
UNIT 6 DERIVATIVE SECURITIES
Options
• Introduction
• Understanding Options
• Payoffs and Profits from Basic Option Position
• Some Basic Option Strategies
• Option Valuation
• An Investors Perspective on Puts and Calls
• Stock Index Options and Interest Rate Options
Futures
• Understanding Futures Market
• The Structure of Future Markets
• The Mechanics of Trading
• Using Future Contracts
• Financial Futures
UNIT 7 ADDITIONAL INVESTMENT OPPURTUNITIES & EFFICIENT MARKET
Warrants and Convertible Securities
• Warrants
• Valuing Warrants
• Speculative Value of a Warrant
• Convertible Securities
• Convertible Bonds
• Risk and Return on Convertibles
• Should Investors Buy Convertible Bonds?
• Convertible Preferred Stock
• Analyzing Convertible Preferred
Market Efficiency
• Concept of Efficient Market
• Why the Market can be Expected to be Efficient?
• Evidence on Market Efficiency
• Implication of Efficient Market Hypothesis
• Evidence of Market Anomalies
UNIT 8 SECURITY ANALYSIS
Market Analysis
• What is the Market?
• Understanding the Stock Market
• Valuing the Market
• Forecasting Changes in the Market/Economy
Industry Analysis
• Performance of Industries Over Time
• What is an Industry?
• Analyzing Industries
Company Analysis
• Fundamental Analysis
• Understanding Earnings
• Determinant of Earning
• Which Earnings are Important?
• Analyzing and Forecasting Earning Growth
• Fundamental Security Analysis in Practice
• The P/E Ratio
• Syntax's P/E Ratio
• Additional Company Analysis
Technical Analysis
• What is Technical Analysis?
• Aggregate Market Analysis
• Individual Stock Analysis
• Testing Technical Analysis Strategies
• Conclusions about Technical Analysis
UNIT 9 INVESTMENT MANAGEMENT
Portfolio Management
• Portfolio Management as a Process
• Formulate an Appropriate Investment Policy
• Determine and Quantify Capital Market Expectations
• Constructing the Portfolio
• Monitor Market Conditions and Investor Circumstances
• Portfolio Adjustments
• Performance Measurement
Portfolio Selection
• Use the Markowitz Portfolio Selection Model
• Consider Borrowing and Lending Possibilities
• Choose the Final Portfolio Based on Preferences
• Implication of Portfolio Selection
Capital Market
• The Assumption of CAPM
• The Market Portfolio
• Equilibrium Risk-Return Trade Off
• Estimating the SML
• Arbitrage Pricing Theory
Recommended Books:
1. Investment Analysis and Management by Charles P. Jones (9th edition).
2. Security Analysis and Portfolio Management by Donald E. Fischer, Ronald J. Jordan (6th edition).
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