FINC6001: Finance – Theory to Applications - Accounting and Finance Assignment Help

Assignment Task:

TASK:

Being a scarce resource (for most), money needs to be properly managed. The second half of this Unit of Study has been devoted to concepts and theories associated with investment management that aim to assist us in understanding portfolio performance evaluation and asset allocation. In the first part of the Major Assignment (written report), we will be exploring different ways to assess the work of asset managers; whilst, in the second part (oral presentation), we will learn how to build portfolios.

Part B (ORAL PRESENTATION)

The second part of the Major Assignment will explore an investment decision that involves the creation of a portfolio containing the ETFs that were allocated in Part A. The creation of this portfolio will be based on a landmark theory in Finance: the Markowitz portfolio optimisation model. When we consider the possible combinations of risk and return generated from a collection of potential assets, we will discover that some of the portfolios constructed are inefficient – these are portfolios that offer too little return for its risk. The Markowitz model is based on the idea that portfolios should be constructed in an efficient way - that is, maximising returns for the risks taken or, alternatively, minimising risks for specific rates of return. In this model, the optimal risky portfolio is the one that maximises this risk-return relationship as measured by the Sharpe ratio. The investment committee at Street Smarties Co. will be meeting at the end of this month and will require you to present and explain the portfolio that you have created using the Markowitz model. Your optimal risky portfolio will be constrained to the five ETFs analysed in Part A of the Assignment with a total investment capital of $10 million. FINC6001 Finance – Theory to Applications Semester 1, 2021

Required: 1. Calculate the amount that would be allocated to each of the five ETFs – in both % weightings and $ amounts. Discuss how the allocation was determined. 2

. Construct the capital market line (CML) and describe how this established.

3. If the potential clients of your constructed portfolio are assumed to have a risk aversion coefficient of

4, calculate the optimal allocation between your portfolio and the risk-free asset – in both % weightings and $ amounts. Explain how the combination has been

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