DCM3102 INVESTMENT OPTIONS & MUTUAL FUNDS

Description

SESSION	JAN-FEB 2026
PROGRAM	BACHELOR OF COMMERCE (B.COM)
SEMESTER	V
COURSE CODE & NAME	DCM3102  INVESTMENT OPTIONS AND MUTUAL FUNDS

 

Set – 1

 

 

Q.1. Compare and contrast equity shares and fixed income securities as investment avenues. Explain which option you would recommend for a risk-averse investor. (7+3 = 10 Marks)

Ans 1.

Equity Shares as Investment

Equity shares form part of the ownership in a company. They entitle shareholders to an equal share of residual profits as well as assets following the time all prior claims have been met. Equity investors receive dividends that vary in amount and are not guaranteed as the board of directors determines the amount on profits at the discretion of the board based on the company’s financial position and future capital needs. The dividends earned from equity investments consist of two components which are: dividend income and capital appreciation. Capital appreciation occurs when prices of shares

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Q.2. Explain the factors influencing investment decisions of domestic retail investors. (10 Marks)

Ans 2.

Factors Influencing Investment Decisions of Retail Investors

The investment decisions of domestic retail investors in India are affected by an intricate interplay between financial, psychological, social and regulatory variables. Understanding these determinants is essential for financial experts, market regulators and those who want to enhance the effectiveness of retail investment decisions and channel household savings to productive capital creation.

Return and Risk

 

Q.3. a) Explain the term Beta and its relevance in investment decisions. b) Calculate the expected return using the CAPM formula. Given: Risk-free rate = 3%, Beta = 1.5, Expected return of the market = 9%. (4+6 = 10 Marks)

Ans 3.

1. a) Beta and Its Relevance in Investment Decisions

Beta is an indicator of systematic risk, which indicates the sensitivity of a security’s return to the changes in returns to the market. It indicates the amount an investment is likely to be able to move relative to a market index. One beta indicates a move in line with the market. Anything higher than 1 indicates greater volatility while a beta less than one indicates lower the risk of volatility. Beta focuses only on risks that are market-related and is not eliminated by diversification.

The Capital Asset Pricing Model (CAPM) is a model in finance used to determine the expected return of an investment based on its systematic risk. It determines the relationship between risk and return by taking into

 

Set – 2

 

Q.4. Explain the features, advantages and challenges of real estate investments. (4+3+3 = 10 Marks)

Ans 4.

Features of Real Estate Investments

Real estate investing involves the purchase, ownership, management lease, sale, or purchase of land and buildings for the purpose of generating profits, capital appreciation or both. Real estate is a tangible and immovable asset that occupies a unique position in the investment landscape because of its physical characteristics, local market characteristics as well as its double role of an investment asset as

 

Q.5. Elaborate on the derivative contracts of Forwards and Futures. (10 Marks)

Ans 5.

Derivative Contracts: Introduction

The derivative contracts of financial instrument whose value is derived from an underlying asset, index or rate and not by the nature that the instrument. The base asset could include equity shares, stock market indices, commodities, currencies, interest rates, and other financial instruments. They serve two main financial functions: hedging which involves reducing risk by using an offset in the derivative market; and speculation, where you can take position to benefit from expected price fluctuations. The derivatives market is a source of cost discovery, risk transfer, and market liquidity that will benefit the whole financial system.

Forward

 

 

Q.6. Evaluate the advantages and risks associated with investing in mutual funds, in the context of the geopolitical tensions arising from the Iran–US conflict. (10 Marks)

Ans 6.

Mutual Funds – Advantages

Mutual funds are professionally-managed group investment vehicles that collect money from large numbers of investors. They then invest the fund in a diversifying range of securities that are in line with the plan’s objectives for investment and the risk profile. The primary advantages of mutual fund investment makes them the ideal alternative for retail investors with limited knowledg