Unit: Financial Management
Sign in to download the full Topic PDF and enable offline revision mode.
Login to AccessPractice CPA Financial Management Introduction to portfolio analysis questions with detailed answers and explanations.
Access past exam questions by topic, improve your understanding, and download PDF for offline revision.
| Year 2023 | Year 2024 | |||
| Stocks | Number of shares | Price (Sh.) | Number of shares | Price (Sh.) |
| A | 20,000 | 45.25 | 20,000 | 48.75 |
| B | 45,000 | 25.38 | 45,000 | 24.75 |
| C | 75,000 | 14.50 | 75,000 | 12.38 |
| D | 23,000 | 87.13 | 23,000 | 98.50 |
| E | 30,800 | 56.50 | 30,800 | 62.50 |
| F | 35,000 | 63.00 | 35,000 | 77.00 |
| G | 42,400 | 32.00 | 42,400 | 38.63 |
| H | 55,000 | 15.25 | 55,000 | 8.75 |
| I | 90,000 | 9.63 | 90,000 | 27.45 |
| J | 18,000 | 71.25 | 18,000 | 75.38 |
| K | 17,400 | 42.13 | 17,400 | 49.63 |
| L | 27,400 | 19.88 | 0 | 27.88 |
| M | 0 | 17.75 | 30,000 | 19.75 |
2023 Sh. | 2024 Sh. | |||
| Cash | 708,400 | 574,600 | ||
| Expenses | 146,000 | 166,000 | ||
| Economic States | Probability | Returns (%) | |
| Security X | Security Y | ||
| A | 0.20 | 10 | 18 |
| B | 0.30 | 15 | 24 |
| C | 0.50 | 17 | 26 |
| Economic conditions | Probability | Market return (%) | Saflox Limited returns (%) |
| Rapid expansion | 0.30 | 25 | 13 |
| Moderate expansion | 0.25 | 20 | 10 |
| No growth | 0.45 | 15 | 8 |
| Year | Market price per share (Sh.) |
| 2023 | 28 |
| 2022 | 22 |
| 2021 | 18 |
| 2020 | 25 |
| 2019 | 28 |
| Investment M | Investment K | ||
| Probability | Return | Probability | Return |
| 0.30 | 20% | 0.20 | 20% |
| 0.40 | 8% | 0.60 | 8% |
| 0.30 | -4% | 0.20 | -4% |
| State of economy | Probability | Return on security A | Return on security B |
| Boom | 0.40 | 27% | 36% |
| Average | 0.50 | 21% | 33% |
| Recession | 0.10 | 18% | 31.5% |
| Year | Return on Mebco Ltd.’s shares (%) |
| 2017 | 18 |
| 2018 | 16 |
| 2019 | 10 |
| 2020 | 6 |
| 2021 | 8 |
| Economic | End of year market price (Sh.) | ||
| Condition | Probability | Share A | Share B |
| Best | 0.40 | 50 | 60 |
| Fair | 0.30 | 42 | 50 |
| Poor | 0.30 | 35 | 40 |
| State of nature | Probability | Forecasted Share Price (Sh.) |
| Excellent | 0.30 | 25 |
| Normal | 0.20 | 22 |
| Poor | 0.35 | 21 |
| Very Poor | 0.15 | 19 |
| Project | Initial outlay | Annual cash flows | Beta coefficient |
| (Sh.) | (Sh.) | ||
| A | 300,000 | 330,000 | 0.3 |
| B | 300,000 | 340,000 | 0.5 |
| C | 400,000 | 480,000 | 1.0 |
| D | 500,000 | 590,000 | 1.5 |
| E | 500,000 | 600,000 | 2.0 |
| Probability | Returns of stock А (%) | Returns of stock B (%) |
| 0.40 | 10 | 8 |
| 0.30 | 7 | 12 |
| 0.30 | 13 | 7 |
| State of the economy | Probability | Returns (%) Security | |
| A | B | ||
| Recession | 0.40 | 18 | 24 |
| Stable | 0.50 | 14 | 22 |
| Expansion | 0.10 | 12 | 21 |
| State | Probability | Returns (%) | |
| Security A | Security B | ||
| Recession | 0.30 | 12 | 6 |
| Stable | 0.40 | 15 | 7.5 |
| Expansion | 0.30 | 10 | 5 |
| Forecasted returns (%) | ||
| Probabilities (Pi) | X | Z |
| 0.10 0.20 0.35 0.05 0.15 0.15 | 10 12 8 15 14 9 | 8 10 7 12 11 8 |
| State of economy | Probability | Forecasted return (%) | |
| Coral Ltd. | Reef Ltd. | ||
| Boom Normal Recession | 0.20 0.60 0.20 | 16 12 8 | 14 10 6 |
| State of economy | Probability (P) | Security returns (%) | |
| A | B | ||
| Stable | 0.30 | 12 | 6 |
| Expansion | 0.40 | 15 | 7.5 |
| Recession | 0.30 | 10 | 5 |
| Month | Forecasted market price per share (Sh.) | Probability |
| 1 | 33 | 0.2 |
| 2 | 30 | 0.1 |
| 3 | 27 | 0.3 |
| 4 | 36 | 0.15 |
| 5 | 39 | 0.25 |
| Economic condition Boom Average Recession | Probability 0.20 0.60 0.20 | Share returns 40% 15% -10% |