BUS286 - Accounting and Finance - Corporate Finance - Assignment Help

BUS286 Accounting and Finance Corporate Finance Assignment Help

Part I 
Part one requires qualitative explanations that display your understanding of the concepts of risk and return. The article of Simon Hoyle gives some understanding of the concepts of risk and return. However, it was published in a newspaper where the target readers were not all educated in finance. You are required to answer the
following questions while providing deeper insights about the concepts of risk and return than those that are provided in the article.
Read the article by Simon Hoyle and answer questions 1-4.
 

Question 1 
Explain how the risk of shares can be calculated by the standard deviation. Your explanation should include the usage of the dispersion statistics, the normal
distribution, and the probability, and how those concepts are utilized in real life finance.
Question 2 
Apparently, Simon Hoyle's article did not mention what would happen to the risk if an investor decided to buy more than one share. Explain how adding new shares to a portfolio can affect the risk and return of that portfolio. You should use the concepts of correlation coefficient and the standard deviation in your explanations.
Question 3 
As you know, the risk of two assets is calculated by getting the square root of the equation:
 P 2 = w 1 2 ? 1 2 + w 2 2 ? 2 2 + 2w 1 w 2 ? 12 ? 1 ? 2
Explain what would happen if one of the two assets was a risk-free asset. In other words, what would be the risk of the combination of the two assets? You have to
explain that in accordance with the above equation.
Question 4 
Explain the distinction between Systematic and Unsystematic Risk? How can investors avoid each one of those risks?

Part 2

Part two requires calculations to answer the questions. Furthermore, it requires qualitative explanations that convey your understanding of the concepts of risk and
return of a portfolio. You are required to answer the following questions while providing deeper insights into the concepts of risk and return than those that are
provided in the article.

There is also a risk-free asset F whose expected return is 9.9 percent.
(i) Calculate the expected return and the standard deviation of Portfolio l, which consists of 40 percent of Asset A and 60 percent of Asset B.

(ii) Calculate the expected return and the standard deviation of Portfolio 2, which consists of 60 percent of Asset A, 22.5 percent of Asset B, and 17.5 percent of Asset C.

(iii) Explain the differences in the risks and the returns between Portfolio 1and 2.

(iv) Calculate the expected return and the standard deviation of Portfolio 3, which consists of 4.8 percent of Asset A, 75 percent of Asset B, and 20.2 percent of the Free
Asset F.

(v) Calculate the expected return and the standard deviation of Portfolio 4, which is equally weighted of the three risky assets A, B, and C.

(vi) Calculate the expected return and the standard deviation of Portfolio 5, which is equally weighted of the four assets (i.e. A, B, C, and F).

(vii) Explain the differences in the risks and the returns between Portfolio 3, 4 and

5. Include the impact of the risk-free asset in your explanation.

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