Financial Management
Discussion
Ask a question about this paper, or help someone else with theirs. Answers are emailed to whoever asked.
No questions yet — be the first to ask.
Need a paper or stuck on a question? Ask here — students reply and you get an email.
Ask about a paper-
BS ZOOLOGY first semester Animal diversity ZOOL 101 - university of Punjab 2025
0 replies Reply → -
Literary criticism
1 reply Reply → -
this paper consists of 60 marks but now we have 35 marks paper.
1 reply Reply → -
Can you please tell me more past papers please because my exams are starting from next week
1 reply Reply → -
Did you provide the past papers of the science of society uos?
1 reply Reply →
Paper text
BMMF5103/SEPT2011/F-AA
PART A
INSTRUCTIONS:
1. THERE ARE TWO (2) QUESTIONS IN THIS PART.
2. ANSWER BOTH QUESTIONS.
Question 1
a. In determining the level of risk for financial assets, when is the coefficient of variation
preferred over the standard deviation?
Provide an example to support your answer.
[3 marks]
b. To reap the benefit of diversification, how should one select and combine the different
financial assets in his or her portfolio? Why?
[4 marks]
c. What is the Security Market Line (SML) and explain its importance in describing the risk-
return relationship. Name TWO (2) factors and illustrate how they can affect the SML.
[4 marks]
d. You have formed a portfolio consist of assets X, Y and Z.
Asset Annual Probability Beta Proportion
Return in Portfolio
X 10% 0.50 1.2 0.333
Y 8% 0.25 1.6 0.333
Z 16% 0.25 2.0 0.333
i) What is the expected annual return of this portfolio?
ii) Calculate the beta of the portfolio.
iii) What can you say about the level of risk of that portfolio as compared to the market
risk?
[6 marks]
e. What is the market risk premium if the risk free rate is 5 percent and the expected
market return is given as follows?
State of Nature Probability Return
Boom 20% 30%
Average 70% 15%
Recession 10% 5%
[3 marks]
[TOTAL: 20 MARKS]
1
