FIN701 - Investment and Portfolio Analysis Assignment

Assignment Task

Activity

1. Compute, for each asset:

i. Total Returns for each month [TR = (Ending Price-Beginning price)/ Beginning Price]

ii. Expected returns

iii. standard deviation

iv. Correlation Coefficient

2. Construct the variance-covariance matrix

3. Construct equally weighted portfolio and calculate Expected Return, Standard Deviation and Sharpe ratio.

4. Reconstruct equally weighted portfolio and calculate Expected Return, Standard Deviation and Sharpe ratio.

5. Use Solver to determine optimal risky portfolio.

6. Create hypothetical portfolios (commencing from Weight A=0 and weight B=100)

7. Calculate Expected return and Standard Deviation for all the above combinations

8. Graph the efficient frontier

9. Graph the optimal portfolio

10. Assuming that the investors prefer lower level of risk than what a portfolio of risky assets offer, introduce a risk-free asset in the portfolio with a return of 3%

11. Using hypothetical weights (A= Portfolio of Risky Assets, B= 1 Risk Free Asset) calculate portfolio Expected Return and Standard Deviation

12. Graph the risk and returns - Capital Allocation Line.

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