25721: Investment Management - Finance Discipline Group - Accounting and Finance Assignment Help

ASSIGNMENT TASK:

TASK:

Question 1 (Asset returns and risk) 

Extreme volatility and falling share prices have been experienced in share markets across the globe since late February. This is a dramatic change from the rising share prices that occurred over the twelve months prior to February. Rooster Wealthy Investors Trust provides you with share prices for eight (8) companies listed on the Australian Securities Exchange (ASX). They ask you to write up an analysis of these companies. In the analysis

you must:
 

(a) Briefly explain, in your own words, whether or not it would have been wise to trade on the ASX since the start of 2020. Note: Australian newspapers have regularly printed articles on this. (worth 1 mark)
(b) Identify the eight (8) companies in the EXCEL spreadsheet and in a table list their ASX industry group and describe, in your own words, two of their main products or services. The description for each company will require at least two sentences. (worth 1 mark)
(c) Graph the share prices of the companies and provide your own opinion, based on these graphs, whether it would be best to buy or short sell each of the companies. (worth 1 mark)
(d) Estimate the monthly average continuous returns and sample standard deviations of the monthly continuous returns for each of the companies and the ASX200 from July 2010 to July 2020. Summarise your estimations in a simple labelled table. (worth 0.5 mark)
(e) Estimate the sample correlation based on the monthly continuous returns for each pair of the eight (8) companies. Summarise your estimations in a simple labelled table and identify the pair that has the strongest relationship and the pair that has the weakest relationship. (worth 0.5 mark)
(f) Based on your estimations in (d) and (e) select four (4) companies that you consider would be the best to create a portfolio with. Provide a brief explanation of your decision.

Question 2 (Mean-variance optimization)

The investors in Rooster Wealthy Investors Trust have a risk aversion factor of A = 4. Rooster Wealthy Investors Trust asks you to analyse a portfolio that consists of two risky assets and a risk-free asset. In the analysis you are required to
 

(a) Explain what a risk aversion factor of A = 4 implies about the investors who buy units in Rooster Wealthy Investors Trust. (worth 1 mark)
(b) The return and risk profile of investors in Rooster Wealthy Investors Trust can be described by the quadratic utility function covered in Lecture 2. Rank the eight companies from the one most preferred by the investors to the least preferred. Show and explain why the companies are ranked in this order. (worth 1 mark)

Ui(E(r),σ) = E(r) −12Aiσ2

(c) Construct a portfolio containing the two (2) companies that have the strongest relationship and a risk-free security. Use your estimations in Question 1 to calculate the percentage of funds that would be invested in each of the two companies and the risk- free asset. Assume the return on the risk-free security is the average cash rate. Do your calculations using trial and error (in a systematic way) in EXCEL and by using EXCEL’s Solver.
 

i. List the percentage of wealth invested in each of the two companies and the risk-free asset and the return and risk of the two (2) companies; the risk-free interest rate security; the optimal risky asset portfolio and the optimal total portfolio (worth 0.5 marks)
ii. In a simple labelled table list the return, risk and utility of ten of the risky asset portfolios that lie near the optimal risky asset portfolio. Explain, in your own words, why these ten (10) portfolios are not the optimum risky asset portfolio (worth 1 marks)
iii. In a fully labelled mean-standard deviation diagram show the positions of the optimal total portfolio, the optimum risky asset portfolio, the risk-free interest rate security, the efficient frontier and capital allocation line. The diagram can be hand drawn. (worth 1 mark)

(d) Provide a recommendation, in your own words, to Rooster Wealthy Investors Trust on whether it would be better to invest in the optimum total portfolio; an ASX200 managed fund; or a risk-free interest rate security.

This 25721: Accounting and Finance Assignment has been solved by our Accounting and Finance Experts at My Uni Paper. Our Assignment Writing Experts are efficient to provide a fresh solution to this question. We are serving more than 10000+ Students in Australia, UK & US by helping them to score HD in their academics.Our Experts are well trained to follow all marking rubrics & referencing style.

Be it a used or new solution, the quality of the work submitted by our assignment experts remains unhampered. You may continue to expect the same or even better quality with the used and new assignment solution files respectively. There’s one thing to be noticed that you could choose one between the two and acquire an HD either way. You could choose a new assignment solution file to get yourself an exclusive, plagiarism (with free Turnitin file), expert quality assignment or order an old solution file that was considered worthy of the highest distinction.