Download Date of Submission: 17-11-2014 FIN 460 Section: 02 Submitted by

Project on: Investment Management.
Submitted by
Group Members
FIN 460
Section: 02
1.
Date of Submission:
17-11-2014
Introduction
We are given Tk. 1,000,000 and we thought of investing this amount in secondary market by buying
equities/shares of some companies. So we went to ‘BLI Securities Ltd.’ which is a brokerage firm to
open a Beneficiary Owners (BO) account to invest in companies. It is mandatory to open a BO account
with a brokerage firm to be an investor. ‘BLI Securities Ltd.’ is a Full-Service Broker. They advised us to
invest in 6 companies and we chose to invest in six different companies within a same industry which
is ‘Pharmaceuticals & Chemicals’. The companies are ACI Formulations Limited, Beximco
Pharmaceuticals Ltd, GlaxoSmithKline, Kohinoor Chemical Co. (Bangladesh) Ltd, Orion Pharma LTD
and Square Pharmaceuticals Limited.
Requirements to open BO Account:
There are some requirements that an investor should meet up prior to open a BO account. The
requirements are:
1.
a.
b.
c.
2.
a.
b.
3.
a.
b.
4.
5.
6.
For An Individual A/C holder:
3 copies of recent passport size photos.
Photocopies s of the National ID card or Passport.
Photocopies s of the Bank Certificate, Bank Statement or MICR Cheque, Driving License (if contains or
necessary) and Ward Commissioner Certificate (if necessary).
For Joint A/C holder:
All requirements (1.a, b & c) of Individual A/C holder’s should be met up.
Photocopy of the joint A/C holder’s National ID card or Passport and 3 copies of the recent passport
size photos.
Must fill up the Nominee Form providing,
1 copy of the recent passport size photo.
Photocopy of the Nominee’s National ID card or Passport.
Must fill up the KYC Form.
Must fill up the Power of Attorney Form.
A/C holder must pay Tk.10 to get BO Form and Tk. 1000 to open BO Account.
Necessary Information about the Brokerage Firm Regarding Different A/Cs:
1. ‘BLI Securities Ltd.’ maintains Margin A/C for their clients. A client of ‘BLI Securities Ltd.’ can borrow
Tk. 500,000 minimum from Margin A/C. But the maximum limit is not defined.
2. ‘BLI Securities Ltd.’ does not provide it’s investors any privilege of borrowing loans for personal
purpose from margin account.
3. This security trading firm has Asset Management A/C for their clients.
4. ‘BLI Securities Ltd.’ has Wrap Account by which the firm collects 50% Brokerage fee per transaction.
5. ‘BLI Securities Ltd.’ has Dividend Reinvestment Plan for their clients.
6. ‘BLI Securities Ltd.’ clients should pay 50% amount of their own money as Initial Margin to initiate a
transaction.
7. ‘BLI Securities Ltd.’ clients should maintain at least 30% margin requirement as Maintenance Margin
and 50% as Actual Margin. ‘BLI Securities Ltd.’ Performs Margin Call if the margin gets below 30%.
8. ‘BLI Securities Ltd.’ doesn’t provide Short-Sale Service in fact Shot-Sale didn’t even start yet in
Bangladesh.
Report Summary
Items
Average Expected
Return
Standard Deviation
Variance
Beta
Risk Free Rate
Market Expected
Return, RM
Market Risk Premium,
MRP
ACIFORMULA
BXPHARMA
GLAXOSMITH
KOHINOOR ORIONPHAR SQUARPHARMA
14.69%
4.97%
0.57%
-0.91%
2.57%
2.42%
30.30%
9.18%
30.30%
12.47%
12.10%
1.47%
12.10%
12.47%
2.61%
0.07%
2.61%
12.47%
4.80%
0.23%
4.80%
12.47%
11.81%
1.39%
11.81%
12.47%
6.98%
0.49%
6.98%
12.47%
21.46%
21.46%
21.46%
21.46%
21.46%
21.46%
8.99%
8.99%
8.99%
8.99%
8.99%
8.99%
Portfolio Beta
20.36%
Portfolio Required Rate
of Return
14.30%
There are 6 companies which are off same industry. In terms of standard deviation (which
means the volatility of the investment) the more it is, the more it get deviate from the mean
(average) as a result there are more risk which might lower the stock of the company as a result
less profit. For example, here the greater risk is in ACIFORMULA (30.30%), then BXPHARMA
(12.10%), ORIONPHAR (11.81%), SQUARPHARMA (6.98%), KOHINOOR (4.80%) and at last
GLAXOSMITH (2.91%). But yet ACIFOMULA has highest returns of 14.69%, then BXPHARMA
(4.97%), then ORIONPHAR, SQUARPHARMA, GLAXOSMITH and at last KOHINOOR. This results
clearly explains the Efficient Market Hypothesis that- The higher the returns, the higher the
risks. But all the individual companies’ returns are below the Market Expected Return. The
portfolio beta also illustrates the same thing that risk is greater than the return. The portfolio
return is 14.30% whereas portfolio beta is 20.36%.