Reference no: EM131025737

Part -1:

Global Corporate Social Responsibility and Sustainable Management

Assignment A

Q1: What is social audit and what is its relevance for business organization?

Q2: What do you understand by business ethics and how it is important for the business?

Q3: What do you understand by Sustainable Development? What are its objectives and components?

Q4: Give a brief overview of Dimensions of Social Responsibility.

Q5: Explain the concept of Corporate Governance and show its relation with Social Responsibility of Business.

Assignment B

BHARAT PETROLUEM

Introduction

Bharat Petroleum Corporation Limited (BPCL) is a downstream oil refining and marketing company. The company has its network spread over all the four regions in India and is represented in almost all markets. It caters to different petroleum sectors - Liquefied Petroleum Gas (LPG) and Kerosene for domestic consumption, automotive fuels and lubricants for vehicles, and feedstock and fuels for industrial applications. The company also manufacture petrochemicals like Benzene, Toluene, Linear Alkyl Benzene feedstock etc. With a sales turnover of Rs. 25,650 crore and profits of Rs. 701.30 crore in 1999, BPCL is the 5th largest company by sales in India. Its strength lies in an efficient refinery and strong distribution network, which has given it a 20% market share in petroleum products in India. BPCL has a tie up with Shell Petroleum Co. of Netherlands to manufacture and market Shell lubricants in India. In a major expansion move, BPCL is increasing its refining capacity through 3 joint ventures and also adding on to its distribution strength by laying a similar number of pipelines. BPCL is also planning a foray into petrochemicals through a 1.8 million tonnes (mt) naphtha craker plant in Tamil Nadu for around Rs. 7,000 crore and this project is scheduled to go on stream by 2002.

Ecological Concern

BPCL has been continuously striving towards conservation and improvement of the environment by adopting new technologies. In March 2003, BPCL introduced low lead MS (with 0.15 gm of lead per liter) in the country. From April 1996, HSD with a maximum sulphur content of 0.5% by weight, was introduced in the metro cities and in the Taj Trapezium. From September 1996, HSD, with a maximum sulphur content of 0.25% by weight, was introduced in the Taj Trapezium. To meet the requirement of HSD all over the country with the revised specification of maximum sulphur content of 0.25% by weight, from April 1999, facilities for Diesel Hydro De-sulphurisation are being put up in the refinery. Distribution of other low sulphur fuels (which has maximum sulphur content of 1.8% by weight) was started in the National capital region from October 1996, which ended the use on High Sulphur FO and RFO. BPCL conducted two advertising compaigns of behalf of the industry - the first on the importance of LPG conservation and the second on the introduction of low leaded petrol. On the pollution control front, BPCL has set up a special sophisticated plant to meet the stringent standards set by Minimum National Standards for Effluents from Oil Refineries (MINAS). BPCL's emission standards are far more stringent than the limits laid down by the Pollution Control Board. BPCL had also invested around Rs. 220 crore, in pollution abatement and energy conservation systems.

Safety and Social Commitments.

Safety continued to be accorded the highest priority in BPCL both in refining and marketing operations. In 2002-03, its refinery achieved 3 million man-hours without Lost Time Accident (LTA) on one occasion and one million man-hours without LTA on two occasions. The microprocessor based control system as its refinery monitors the operating conditions for safety hazards and the refinery is divided into three separate areas as high risk, low risk and medium risk. Each employee, irrespective of levels, is given fire-fighting training and mock drills are carried out at quarterly intervals for different range fires. Employees are given training on simulators so that they learn by committing mistakes on simulators and not in real conditions. BPCL's Mumbai refinery has a Mutual Aid agreement along with the neighboring 9 industries for fighting major fires.

As a result of higher exposure to various safety awareness programs, there has been a reduction of injuries in BPCL's refinery by 34% for its own employees, and 43% for contractors' employees, in 1996-97. Moreover the frequency of LTA has come down from 1.5% to 0.6% for its employees and from 5.6% to 1.7% for contractors employees. To enhance safety performance, BPCL introduced ‘safety by walk-around' concept wherein experienced officers were appointed as safety surveyors and safety sampling was done by senior management staff. It also organized a safety symposium at its refinery in which members from the oil industry, government bodies. Oil awareness on LPG safety, BPCL also screened one-minute films on the safe handling of LPG, on popular TV channels.

BPCL sponsors many sporting events like Santosh Trophy, National Football Tournament, and also coaching camps for youngsters. Lifeline Express was contributed to social welfare - a fully equipped train, which look the latest medical technology to remote villages of India. The company has also adopted 11 Scheduled caste/Scheduled tribes villages under the Component and Tribal sub-plan. The facilities provided by the company include community centers, tube/borewells, educational support medical facilities, vocational guidance and training to make villagers self-reliant and improve their standard of living.

Achievements

BPCL was adjudged the winner of the ‘Oil Industry Safety Awards' for its safety performance being the best among all the "LPG Marketing Organization in 1995-96" for the fourth year in succession. BPCL's annual report for 1994-95 was selected by ICAI as the best presented amongst the public sector/joint sector companies for the second year in succession. The South Asian Federation of Accountants also adjudged the same as the second best presented in the non-financial sector in the SAARC region. BPCL received ISO-9002 certification from Bureau Veritas Quality International (BVQI) for 15 out of its 22 bottling plants. BPCL has also received ISO-9002 accreditation for its refinery, aviation service stations at Mumbai, Delhi, Calcutta and Bangalore depots at Miraj and Mysore and lubricants blending plant at Wadilube.

Q1: What are the Social Commitments of Bharat Petroleum?

Q2: What are the Ecological Concerns projected by Bharat Petroleum?

Q3: Has Bharat Petroleum benefitted from showing responsibility towards the environment?

Assignment C

1. Sustainable development is defined as:
a) Development to deplete the natural resources
b) To completely use up the natural resources by the present generation
c) To degrade quality of human life
d) Development, which meets the needs of the present without compromising the ability of future generations to meet their own needs

2. Sustainable activities are those which
a) Use materials in continuous cycles.
b) Use reliable sources of energy continuously.
c) Use the positive and just side of human personality.
d) All of the above

3. Today's environmental problems are largely the consequence of
a) Management of Waste Products
b) Sustainable Consumption of natural resources
c) the unsustainable consumption of natural resources and the mismanagement of waste products
d) Re-use and Recycling of products

4. The HDI is computed from:
a) gross domestic production per capita, adjusted for local purchasing power
b) life expectancy at birth
c) Literacy
d) All of the above

5. The positivist approach was studied in terms of
a) Environment Protection
b) FDI
c) HDI
d) GDP/GNP

6. The goal of sustainable agriculture is to :
a) Degrade Environment
b) Increase Pollution
c) maintain production at levels necessary to meet the increasing aspirations of an expanding world population without degrading the environments.
d) Decrease Productivity

7. Sustainability Indicators include:
a) crop yields,
b) productivity,
c) nutrient status
d) All of the above

8. The major advantage of crop diversification is
a) reduced erosion,
b) reduced soil fertility,
c) maximization of risk, and
d) decreased yield

9. CSR is about how companies :
a) manage the business processes to produce an overall positive impact on society
b) increase profits
c) Harm the environment
d) Have a negative impact on society

10. Companies who are willing to ____ are committed:
a) provide information that is incredible
b) provide information that is ambiguous
c) provide information that is credible
d) provide information that is unverifiable

11. CSR will advance ___ across sectors
a) Profitably
b) Inconsistently
c) Consistently
d) ecologically

12. Assessment of social environment is an integral part of

a) maximization of profits
b) ensuring CSR
c) degrading the environment
d) ensuring political stability

13. The following act deals with welfare of the employees:
a) Factories Act
b) the Employees Statement Insurance Act, 1948.
c) Employees Provident Fund
d) All of the above

14. Social accounting is:
a) the systematic assessment and reporting on those aspects of a company as activities that have a political impact
b) the systematic assessment and reporting on those aspects of a company as activities that have an economic impact
c) the systematic assessment and reporting on those aspects of a company as activities that have a technical impact
d) the systematic assessment and reporting on those aspects of a company as activities that have a social impact

15. The Social Income Statement is divided into:
a) Social Benefits and Costs to Staff
b) Social Benefits and Costs to Community
c) Social Benefits and Costs to General Public
d) All of the above

16. The socio-economic operating statement should be prepared
a) along with the temperature of the place
b) along with the financial statements of the company
c) along with the political statements
d) along with the technical statements

17. Social audit refers to
a) the process involving a retrospective review of the impact or contribution of a company to the recognized political dimensions
b) the process involving a retrospective review of the impact or contribution of a company to the recognized technical dimensions
c) the process involving a review of the impact of a company to the recognized social dimensions
d) the process involving a retrospective review of the impact or contribution of a company to the recognized economic dimensions

18. ITC has set up ____ to fulfill its CSR
a) CFC
b) GHG
c) e choupals
d) All of the above

19. Ethical behavior is:
a) a short term strategy
b) a Long term strategy
c) a short and long term strategy
d) a medium term strategy

20. Morality is the standard
a) which individual or group determine about deciding what is right or wrong and good or evil
b) which individual or group determine about deciding what should be done
c) which individual or group determine about deciding what gives highest profits
d) which individual or group determine about deciding what brings dissatisfaction

21. Business Ethics concentrate on
a) on profitable standards as they apply to business policies, institutions and behaviour
b) on moral standards as they apply to business policies, institutions and behaviour
c) on political standards as they apply to business policies, institutions and behaviour
d) on technical standards as they apply to business policies, institutions and behaviour

22. Free markets are justified from ethical point of view because
a) they allocate resources and distribute commodities in ways that are just
b) they maximize the economic utility of society's members
c) they respect the freedom of choice of both buyers and sellers
d) All of the above

23. Corporate Governance can be defined
a) as a systematic process by which companies are directed and controlled to enhance their wealth generating capacity
b) as a unsystematic process by which companies are directed and controlled to enhance their wealth generating capacity
c) as a systematic process by which companies are directed and controlled to enhance their space
d) as a systematic process by which companies are directed and controlled to enhance their political contacts

24. Cadbury Committee was set up by ___ in ____
a) Tokyo Stock Exchange, 1980
b) Singapore Stock Exchange, 1985
c) London Stock Exchange, 1991
d) None of the above

25. Naresh Committee was a result of
a) Satyam Fiasco
b) Enron Fiasco
c) Arcelor Mittal amalgamation
d) Microsoft emergence

26. To be a public enterprise
a) Government should have no role
b) Government should have 51% ownership of shares
c) it should be set outside the country
d) It should be privately owned

27. Characteristics of a Socially responsible firm are:
a) Stuck to the basics and produced only high quality goods and services for specific market niches
b) Firmly practiced the dual principles of self-management and decentralization
c) Constantly solicited feedback from customers on all subjects from product direction to corporate donations
d) All of the above

28. Social audit is an outcome of (in increasing order)
a) Assessment& Evaluation, Identification, Measurement, Reporting
b) Identification, Assessment& Evaluation, Measurement, Reporting
c) Identification, Measurement, Assessment& Evaluation, Reporting
d) Reporting, Identification, Assessment& Evaluation, Measurement

29. Social Audit covers
a) Ethical Issues
b) Equal Opportunity
c) Quality of Life
d) All of the above

30. Which of the following is an unethical practice?
a) Selling Products less in demand in home countries
b) Selling products of use
c) Blue Marketing
d) Selling products at cost price

31. Counterfeiting refers to
a) printing money
b) stealing money
c) violating the patent and copyright of another firm
d) All of the above

32. Grey marketing refers to
a) selling grey coloured products
b) goods are imported and sold through market distribution channels not authorised by the manufacturer
c) Selling bad quality products
d) Selling same type of products

33. Comprehensive Audit tries to

a) measure, verify and evaluate the total performance of the organization including its profitability activities
b) measure, verify and evaluate the total performance of the organization including its technical activities
c) measure, verify and evaluate the total performance of the organization including its economic activities
d) measure, verify and evaluate the total performance of the organization including its social responsibility activities

34. Crisis Management is
a) the art of making decisions to head off or mitigate the effects of an event, when under stress
b) the art of protecting the environment when under stress
c) the art of increasing profits when under stress
d) the art of moving ahead technologically when under stress

35. Triple Bottom Line includes
a) People
b) Planet
c) Profit
d) All of the above

36. People refers to
a) increasing profits
b) harming the environment
c) fair and beneficial business practices toward labour and the community and region in which a corporation conducts its business
d) All of the above

37. Planet refers to
a) Earth
b) sustainable environmental practices
c) Using non renewable resources
d) Polluting the environment

38. Adding ecotourism or geotourism to an already rich tourism market such as the Dominican Republic- is an example of-
a) Reaching untapped market potential
b) misusing the environment
c) Marketing the place to increase pollution
d) increasing profits

39. Which of the following is a criticism of TBL?
a) Division of Labour
b) effectiveness
c) Nationalism
d) All of the above

40. Purpose of Sustainability Reporting is

a) Benchmarking
b) Demonstrating
c) Comparing
d) All of the above

Part -2:

e-Commerce

SECTION A:

Question 1: Explain B2B E-Commerce using an example of a book distributor who stocks a large number of books, which he distributes via a large network of book sellers. Assume that the distributor has stocks of books of a large number of publishers and book sellers order books as and when their stock is low. Distributors give 1 month's time to booksellers for payment.
Question 2: Explain the system architecture of E-Commerce by looking at it as a set of layers with the physical network at the bottom layer and applications at the top layer.

Question 3: What do you understand by EDI? Is EDI used in B2C or B2B E-Commerce? Why is EDI important in E-Commerce?

Question 4:Why is security important in E-Commerce? What are the security issues to be taken into account while designing a security system for E-Commerce?

Question 5: What types of electronic payment systems are required in E-Commerce? Why are there different types of payment systems? Explain the necessary characteristics of each type of payment system and give an example each of where it is used.

SECTION B:

Question 6: What three forces lead to the WWW's emergence as the single most dynamic force in information technology?
Question 7: Why is it so important to align the electronic commerce strategy with the overall business strategy?

Question 8: Give examples of how the supplier's information system can be used at every link in the value chain by the customer?
Question 9:Define the following terms and discuss the Infrastructure needed for an E-Commerce Environment: (Nov'09)
(i) e-businesses
(ii) e-commerce
(iii) e-cooperation
(iv) e-information
(v) e-procurement
(vi) e-government

SECTION C

10.1 By Electronic Commerce we mean:
a. Commerce of electronic goods
b. Commerce which depends on electronics
c. Commerce which is based on the use of internet
d. Commerce which is based on transactions using computers connected by telecommunication network

10.2 For carrying out B2B e-Commerce the following infrastructure is essential: (i) World Wide Web
(ii) Corporate network
(iii) Electronic Data Interchange standards
(iv) Secure Payment Services
(v)Secure electronic communication link connecting businesses
a. i, ii, iii
b. ii, iii, iv
c. ii, iii, iv, v
d. i, ii, iii, iv, v

10.3 For carrying out B2C e-Commerce the following infrastructure is essential (i) World Wide Web
(ii) Corporate network
(iii) Electronic Data Interchange standards
(iv) Secure Payment Services
(v) Secure electronic communication link connecting businesses
a. i, iv
b. i, iii, iv
c. ii, iii
d. i, ii, iii, iv

10.4 For carrying out C2C e-Commerce the following infrastructure is essential (i) World Wide Web
(ii) Corporate network
(iii) Electronic Data Interchange standards
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System Analysis and Design/Electronic Commerce Multiple Choice Questions
(iv) Secure Payment Services
(v)Secure electronic communication link connecting businesses
a. i and ii
b. ii and iv
c. i and iii
d. i and iv

10.5 Advantages of B2C commerce are (i) Business gets a wide reach to customers
(ii) Payment for services easy
(iii)Shop can be open 24 hours a day seven days a week
(iv)Privacy of transaction always maintained
a. i and ii
b. ii and iii
c. i and iii
d. iii and iv

10.6 B2C commerce
a. includes services such as legal advice
b. means only shopping for physical goods
c. means only customers should approach customers to sell
d. means only customers should approach business to buy

10.7 Advantages of B2C commerce to customers are (i)wide variety of goods can be accessed and comparative prices can be found
(ii) shopping can be done at any time
(iii)privacy of transactions can be guaranteed
(iv)security of transactions can be guaranteed
a. i and ii
b. ii and iii
c. iii and iv
d. i and iv

10.8 Disadvantages of e-Commerce in India are (i) internet access is not universally available
(ii) Credit card payment security is not yet guaranteed
(iii) Transactions are de-personalized and human contact is missing
(iv) Cyberlaws are not in place
a. i and ii
b. ii and iii
c. i, ii, iii
d. i, ii, iii, iv

10.9 Electronic Data Interchange is necessary in
a. B2C e-Commerce
b. C2C e-Commerce
c. B2B e-Commerce
d. Commerce using internet

10.10 EDI requires
a. representation of common business documents in computer readable forms
b. data entry operators by receivers
c. special value added networks
d. special hardware at co-operating Business premises

10.11 EDI standards are
a. not universally available
b. essential for B2B commerce
c. not required for B2B commerce
d. still being evolved

10.12 EDIFACT is a standard
a. for representing business forms used in e-Commerce
b. for e-mail transaction for e-Commerce
c. for ftp in e-Commerce
d. protocol used in e-Commerce

10.13 EDIFACT standard was developed by
a. American National Standard Institute
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System Analysis and Design/Electronic Commerce Multiple Choice Questions
b. International Standard Institute
c. European Common Market
d. United Nations Economic Commission for Europe

10.14 ANSI X.12 is a standard developed by
a. American National Standard Institute
b. International Standard Institute
c. European Common Market
d. United Nations Economic Commission for Europe

10.15 In B2B e-Commerce
(i) Co-operating Business should give an EDI standard to be used
(ii) Programs must be developed to translate EDI forms to a form accepted by application program
(iii) Method of transmitting/receiving data should be mutually agreed
(iv) It is essential to use internet
a. i, ii
b. i, ii, iii
c. i, ii, iii, iv
d. ii, iii, iv

10.16 EDI use
a. requires an extranet
b. requires value added network
c. can be done on internet
d. requires a corporate intranet

10.17 EDI over internet uses
a. MIME to attach EDI forms to e-mail messages
b. FTP to send business forms
c. HTTP to send business forms
d. SGML to send business forms

10.18 For secure EDI transmission on internet
a. MIME is used
b. S/MIME is used
V. Rajaraman/IISc. Bangalore M13/V1/July 04/4
System Analysis and Design/Electronic Commerce Multiple Choice Questions
c. PGP is used
d. TCP/IP is used

10.19 EDI standard
a. is not easily available
b. defines several hundred transaction sets for various business forms
c. is not popular
d. defines only a transmission protocol

10.20 By security in e-Commerce we mean
(i) Protecting an organization's data resource from unauthorized access
(ii)Preventing disasters from happening
(iii) Authenticating messages received by an organization
(iv) Protecting messages sent on the internet from being read and understood by unauthorized persons/organizations
a. i, ii
b. ii, iii
c. iii, iv
d. i, iii, iv

10.21 A firewall is a
a. wall built to prevent fires from damaging a corporate intranet
b. security device deployed at the boundary of a company to prevent unauthorized physical access
c. security device deployed at the boundary of a corporate intranet to protect it from unauthorized access
d. device to prevent all accesses from the internet to the corporate intranet

10.22 A firewall may be implemented in
a. routers which connect intranet to internet
b. bridges used in an intranet
c. expensive modem
d. user's application programs

10.23 Firewall as part of a router program
a. filters only packets coming from internet
V. Rajaraman/IISc. Bangalore M13/V1/July 04/5
System Analysis and Design/Electronic Commerce Multiple Choice Questions
b. filters only packets going to internet
c. filters packets travelling from and to the intranet from the internet
d. ensures rapid traffic of packets for speedy e-Commerce

10.24 Filtering of packets by firewall based on a router has facilities to
a. i, iii
b. i, ii, iii
c. i, ii, iii, iv
d. ii, iii, iv

10.25 Main function of proxy application gateway firewall is
a. to allow corporate users to use efficiently all internet services
b. to allow intranet users to securely use specified internet services
c. to allow corporate users to use all internet services
d. to prevent corporate users from using internet services

10.26 Proxy application gateway
(i) acts on behalf of all intranet users wanting to access interne securely
(ii)monitors all accesses to internet and allows access to only specified IP addresses
(iii) disallows use of certain protocols with security problems
(iv) disallows all internet users from accessing intranet
a. i, ii
b. i, ii, iii
c. i, ii, iii, iv
d. ii, iii, iv

10.27 A hardened firewall host on an intranet
(i) has a proxy application gateway program running on it
(ii)Allows specified internet users to access specified services in the intranet
(iii) Initiates all internet activities requested by clients and monitors them
(iv) prevents outsiders from accessing IP addresses within the intranet
a. i, ii
b. i, ii, iii
c. i, ii, iii, iv
d. ii, iii, iv

10.28 A hardened firewall host on an Intranet is
a. a software which runs in any of the computers in the intranet
b. a software which runs on a special reserved computer on the intranet
c. a stripped down computer connected to the intranet
d. a mainframe connected to the intranet to ensure security

10.29 By encryption of a text we mean
a. compressing it
b. expanding it
c. scrambling it to preserve its security
d. hashing it
10.30 Encryption is required to
(i) protect business information from eavesdropping when it is transmitted on internet
(ii)efficiently use the bandwidth available in PSTN
(iii) to protect information stored in companies' databases from retrieval
(iv) to preserve secrecy of information stored in databases if an unauthorized person retrieves it
a. i and ii
b. ii and iii
c. iii and iv
d. i and iv

10.31 Encryption can be done
a. only on textual data
b. only on ASCII coded data
c. on any bit string
d. only on mnemonic data

10.32 By applying permutation (31254) and substitution by 5 characters away from current character (A ?? F , B ?? G etc..) the following string ABRACADABRA becomes
a. FGWCAAADRBF
b. RABCAAADRBF
c. WFGHFFFIWGF
d. None of the above

10.33 The following ciphertext was received. The plaintext was permuted using permutation (34152) and substitution. Substitute character by character +3 (A ?? D, etc). The plain text after decryption is: Cipher text : PDLJDLXHVQC
a. MAIGAIUESNZ
b. IAMAGENIUSZ
c. LDPDJHPLXVZ
d. IAMAGENIUSC

10.34 By symmetric key encryption we mean
a. one private key is used for both encryption and decryption
b. private and public key used are symmetric
c. only public keys are used for encryption
d. only symmetric key is used for encryption

10.35 The acronym DES stands for
a. Digital Evaluation System
b. Digital Encryption Standard
c. Digital Encryption System
d. Double Encryption Standard

10.36 DES works by using
a. permutation and substitution on 64 bit blocks of plain text
b. only permutations on blocks of 128 bits
c. exclusive ORing key bits with 64 bit blocks
d. 4 rounds of substitution on 64 bit blocks with 56 bit keys

10.37 DES
(i) is a symmetric key encryption method
(ii)guarantees absolute security
(iii) is implementable as hardware VLSI chip
(iv) is a public key encryption method
a. i and ii
b. ii and iii
c. i and iii
d. iii and iv

10.38 DES using 56 bit keys
a. Cannot be broken in reasonable time using presently available computers
b. Can be broken only if the algorithm is known using even slow computers.
c. Can be broken with presently available high performance computers.
d. It is impossible to break ever.

10.39 Triple DES uses
a. 168 bit keys on 64-bit blocks of plain text
b. Working on 64-bit blocks of plain text and 56 bit keys by applying DES algorithm for three rounds.
c. Works with 144 bit blocks of plain text and applies DES algorithm once.
d. Uses 128 bit blocks of plain text and 112 bit keys and apply DES algorithm thrice.

10.40 ripple DES
a. Cannot be broken in reasonable time using presently available computers.
b. Can be broken only if the algorithm is known using even slow computer.
c. Can be broken with presently available high performance computers.
d. It is impossible to break ever.

Part -3:

Security Analysis and Portfolio Management

SECTION A:

Q1 "There is a trade-off between risk and return." Explain this statement.
Q2 "Stock exchanges act as barometers of the health of the economy." Discuss.
Q3 What is Beta? How is it interpreted?
Q4 "Fundamental analysis provides an analytical framework for rational investment decision making.'' Explain.
Q5 Explain the merits and demerits of technical analysis as a tool of security analysis.

SECTIONB:

Q1 "When someone refers to efficient capital markets, they mean that security prices fully reflect all available information."
Q2 "CAPM postulates the nature of relationship between the expected return and the systematic risk of a security." Explain.
Q3 "Forward contracts are a part of everyday life." Explain.

CASE STUDY:

You are given the following historical performance information on the capital market and a mutual fund:

Year	Mutual fund beta	Mutual fund return (per cent)	Return on market index (per cent)	Return on Govt. securities (per cent)
1 2 3 4 5 6 7 8 9 10	0.90 0.95 0.95 1.00 1.00 0.90 0.80 0.75 0.75 0.70	- 3.00 1.50 18.00 22.00 10.00 7.00 18.00 24.00 15.00 - 2.00	- 8.50 4.00 14.00 18.50 5.70 1.20 16.00 18.00 10.00 8.00	6.50 6.50 6.00 6.00 5.75 5.75 6.00 5.50 5.50 6.00

Calculate the following risk adjusted return measures for the mutual fund:

(a) Reward-to-variability ratio or Sharpe ratio
(b) Reward-to-volatility ratio or Treynor ratio

Comment on the mutual fund's performance.

SECTION C

Q1. For investment purposes:
(a) Common stock is considered a fixed income security
(b) Preferred stock is considered a fixed income security
(c) Both are considered fixed income securities.
(d) Derivatives is considered fixed income securities

Q2 The scores that have the greatest effect on the value of the variance are those
(a) below the mean
(b) nearest the mean
(c) farthest from the mean
(d) none of the above

Q3 Without violating the rules of CAPM, which of the following strategies may be undertaken in an attempt to earn a return that's greater than that of the market?
(a) Short sell securities that have a beta of less than one and purchase the market portfolio.
(b) Purchase securities that have a higher standard deviation than that of the market.
(c) Purchase securities whose correlation coefficient with that of the market is greater than one.
(d) All of the above.

Q4 An investor seeking to capitalize on a strong market upswing reduces her money market holdings and greatly increases her holding of stocks. This investor is primarily increasing:
(a) Total risk
(b) Systematic risk
(c) Non market risk
(d) Unsystematic risk

Q5 An investor invests 30 percent of his wealth in a risky asset with an expected rate of return of 15 percent and a variance of 400 and 70 percent in a T-bill that pays 6 percent. His portfolio's expected return and standard deviation are __________ and _________ respectively.
(a) 8.7%, 12%
(b) 8.7%, 6 %
(c) 11.4% , 6%
(d) 12%, 6%

Q6 Points under capital allocation line are __________ by investors.
(a) desirable but not achievable
(b) achievable but not desirable
(c) both desirable and achievable
(d) neither desirable nor achievable

Q7 Which statement about portfolio diversification is correct?
(a) The risk-reducing benefits of diversification do not occur meaningfully until at least 50-60 individual securities have been purchased.
(b) Because diversification reduces portfolio's total risk, it necessarily reduces the portfolio's expected return.
(c) Typically, as more securities are added to a portfolio, total risk would be expected to decrease (at a decreasing rate).
(d) None of the above.

Q8 Assume risk free-rate is 5%. The expected return on market portfolio is 12%, and its standard deviation is 20%. A company has an expected return of 18%, a standard deviation of 30% and a correlation of 1.5 with the market. What is the company's Treynor Ratio?
(a) 0.047
(b) 0.058
(c) 0.087
(d) 0.092

Q9 What are the three main criteria used for portfolio analysis?
(a) Balance, attractiveness and fit.
(b) The BCG matrix, the Ashridge Portfolio Display and the Ansoff matrix.
(c) Synergies, geographical spread and diversification.
(d) Spread of risk; range of products; range of services.

Q10 Which of the following best describes the relationship between the nature of diversification of a firm and the financial performance of that firm?
(a) The more unrelated a firm's portfolio, the higher the financial performance.
(b) The less diversified the portfolio the higher the financial performance.
(c) Related and limitedly diversified companies perform better on average than both undiversified and heavily diversified companies.
(d) There is no relationship.

Q11 Active portfolio management consists of __________.
(a) market timing
(b) security analysis
(c) indexing
(d) A and B

Q12. A purely passive strategy
(a) uses only index funds.
(b) uses weights that change in response to market conditions.
(c) uses only risk-free assets.
(d) is best if there is "noise" in realized returns.
(e) is useless if abnormal returns are available.

Q13 Consider these two investment strategies:

	Strategy 1 (%)	Strategy 2 (%)
Expected return	6	9
Standard deviation	0	4
Highest return	6	15
Lowest return	6	6

Strategy ___ is the dominant strategy because __________.
(a) 1, it is risk less
(b) 1, it has the highest reward/risk ratio
(c) 2, its return is at least equal to Strategy 1 and sometimes greater
(d) 2, it has the highest reward/risk ratio
(e) both strategies are equally preferred.

Q14. Arbitrage is the presence of a
(a) Fixed profit
(b) Risky profit
(c) Riskless profit
(d) Maximizing profit

Q15. Compounding refers to the:
(a) Earning of interest on prospectively earned interest
(b) Earning of interest on previously earned interest
(c) Earning of interest on principal amount
(d) B and C

Q16. The three broad categories of financial assets are ____________.
(a) Money market securities, long-term debt and equity
(b) Corporate securities, derivatives and equity
(c) Debt, equity and derivatives
(d) All of the given options

Q17. Which of the following is excluded from the fixed income securities?
(a) Bonds
(b) Preferred stock
(c) Saving deposits
(d) Options

Q18. Financial securities with a maturity of less than a year from their original issue date are sold in the:
(a) Money market
(b) Bond market
(c) Equity market
(d) Derivative market

Q19 Which of the following represents low-priced, speculative and risky securities?
(a) Income stocks
(b) Penny stocks
(c) Defensive stocks
(d) Cyclical stocks

Q20 Which of the following is EXCLUDED from Porter's competitive factors?
(a) Bargaining power of buyers
(b) Rivalry between existing competitors
(c) Substitute products or services
(d) Changes in the economy

Q21 If the standard deviation of stock A is 30%, standard deviation of stock B is 30% and the correlation between stocks A and B is 0.8, the co-variance between stocks A and B is:
(a) 9%
(b) 7.2%
(c) 6.42%
(d) 10%

Q22 Which of the following statements regarding Efficient frontier are incorrect?
(a) Efficient frontier represents that set of portfolios that provides the maximum rate of return for every given level of risk.
(b) Efficient frontier provides the maximum risk for each level of return.
(c) Points along the efficient frontier dominate all points beneath the curve.
(d) Points along the curve to the right of any other point on the curve must have a higher expected return and higher level of risk.

Q23. Brokerage fee charged by a stockbroker is an example of:
(a) Margin profit
(b) Insurance premium
(c) Transaction cost
(d) Capital expenditure

Q24 A form of the EMH which states that security prices fully reflect all public and private information.
(a) Strong form efficiency
(b) Weak form efficiency
(c) Semi strong form efficiency
(d) None of the given options

Q25 The computation of the Dow Jones Industrial Average is known as a __________ index.
(a) Price-weighted
(b) Market value
(c) Equal-weighted
(d) Volume weighted

Q26. Which of the following is defined as an investment strategy that involves ongoing
buying and selling actions by the investors?
(a) Active strategy
(b) Passive strategy
(c) Buy-and-hold strategy
(d) All of the given options

Q27. In Security Analysis and Portfolio Management beta is the measure of:
(a) Systematic risk
(b) Unsystematic risk
(c) Total risk
(d) Business risk

Q28 Which of the following statement is (are) inconsistent with Markowitz theory of portfolio management?
1. Investors maximize a one-period expected utility curve with inherent diminishing marginal utility of wealth.
2. Investors use the risk measure of beta as the basis of determining risk.
3. Investors base their investment decisions exclusively on the basis of expected risk and return.
4. A single asset of portfolio of assets is considered to be efficient if no available asset has a superior return for a given risk level, or lower risk given a return level.

(a) 1. only
(b) 2. only
(c) 3. only
(d) 3. and 4.

Q29 The Price/Earning ratio valuation method values a company:
(a) on an absolute basis.
(b) relative to other comparable companies based on the ratio of value to earnings.
(c) based on historical earnings
(d) none of the above.

Q30 Young company does not currently pay any dividends. An analyst forecasts that Young company will pay its first dividend of $0.50 per share at the end of year 5 and that the dividend payout will grow at the rate of 12% per year in perpetuity. If the required rate of return on young company stock is 13%, the current value of its stock will be closest to:
(a) $27.14
(b) $30.67
(c) $50.00
(d) $52.00

Q31. Which of the following statements is (are) valid regarding the interest rate risk for floating rate securities?

The price of floating- rate security will fluctuate because:

1. The longer the time to the next coupon reset date, the greater the potential price fluctuation.
2. The required margin that investors demand in the market changes.
3. A floating-rate security can have a cap.

(a) 1 only
(b) 1 and 2
(c) 1 and 3
(d) 1,2 and 3

Q32. What is the price of a stock estimated to pay a dividend of $.60 next year, if the dividend growth rate is 5% and the appropriate discount rate is 8%?
(a) $18
(b) $19
(c) $20
(d) $21

Q33. Which of the following is on the horizontal axis of the Security Market Line?
(a) Standard deviation
(b) Beta
(c) Expected return
(d) Required return

Q34. A call is an option to
(a) sell stock at a specified price.
(b) buy stock at a specified price
(c) sell stock on a specified date
(d) buy stock on a specified date

Q35. If you were confident that the price of stock X would drop dramatically within two months, which of the following investment transactions would yield the highest return on your investment?
(a) Purchase stock X
(b) Sell stock X short
(c) Purchase a call on stock X
(d) Purchase a put on stock X

Q36 While bond prices fluctuate,
(a) yields are constant
(b) coupons are constant
(c) the spread between yields is constant
(d) short-term bond prices fluctuate even more

Q37. If interest rates rise, the price of preferred stock
(a) is not affected
(b) rises
(c) falls
(d) may rise or fall

Q38. The use of financial leverage by a firm may be measured by the
(a) ratio of debt to total assets
(b) firm's beta coefficient
(c) firm's retention of earnings
(d) ratio of the price of the firm's stock price to its earnings

Q39. Which of the following is defined as the rate of return anticipated on a bond if it is held until the maturity date?
(a) Discount rate
(b) Interest free rate
(c) Return on equity
(d) Yield to maturity

Q40. A large number of competing investors is necessary for market efficiency because:

1. it creates independent and random price changes.
2. it results in faster price adjustment.
3. information is more fully examined and acted upon.

(a) 1 only
(b) 1 and 2
(c) 2 and 3
(d) 1,2 and 3