University of New Orleans, USA Carl B. McGowan, Jr., Norfolk State University, USA Susan E. Moeller, Eastern Michigan University, USA ABSTRACT In this paper, we demonstrate how to compute the required rate of return for Coca-Cola using modern portfolio theory with data downloaded from the internet. We demonstrate how to calculate monthly returns for the index and Coca-Cola and how to use the returns to compute the beta coefficient and the required rate of return using the downloaded data. We show
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M.I.T. Sloan School of Management Spring 1999 15.415 First Half Summary Present Values • Basic Idea: We should discount future cash flows. The appropriate discount rate is the opportunity cost of capital. • Net Present Value: The net present value of a stream of yearly cash flows is N P V = C0 + C1 C2 Cn + + ··· + , 2 1 + r1 (1 + r2 ) (1 + rn )n where rn is the n year discount rate. • Monthly Rate: The monthly rate, x, is x = (1 + EAR) 12 − 1, where EAR is the effective annual rate. The EAR
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W14232 INVESTMENTS: DELINEATING AN EFFICIENT PORTFOLIO Upasana Mitra and M. Kannadhasan wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
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firm-specific risk e. either firm-specific or market risk 1. a and e 2. a and c The portfolio risk is calculated through the standard deviation of the portfolio. It includes the variance of the real estate, the correlation/covariance between real estate and stocks, the correlation/covariance between real estate and bonds. 3. Only a is valid. 1. Valid. Since it is the minimum variance portfolio of risky securities, its variance must be the lowest than those of all other securities.
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The averaging out of independent risks in a large portfolio is called diversification. The principle of diversification is used routinely in the insurance industry. In this paper I will talk about two different types of home insurance and talk about the different risks associated with each. Discussion A portfolio is used to describe a collection of securities. In finance, the risk of an individual security differs from the risk of a portfolio composed of similar securities. In order to help
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FIN 6275 (Part I) Investment Analysis and Global Portfolio Management Spring 2015 Homework 2: Portfolio Evaluation This homework will assess the performance of your portfolio that you created on Bloomberg at the beginning of class. I. Portfolio: 1. Provide a print out of the portfolio you formed at the beginning of the semester. Hint: Go to Bloomberg and type PRTU. Then choose your portfolio by clicking on it: print and provide that screen which lists what you
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Assignment 3 1. Design a multifactor model with at least 2 factors besides the market factor, and answer the following questions. a) What makes your choice of factor a “factor” in multifactor model? b) Does the factor of your choice co-move with the market factor? If yes, should you include it along with the market factor? c) Describe how the stock return would be affected when the factor of your choice changes. d) Describe a scenario where one can benefit from trading
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Are you a Marksman Trader? Use Sharpe ratio to know A marksman is a person who is skilled in shooting at a mark with great precision. They are trained hard to shoot at a target at various distances under variable environmental conditions with deadly accuracy. They are consistent shooters. Likewise, in trading, you can see for yourself if you are a precision trader. You would use a Sharpe ratio. Most traders fail to use this performance metric to their advantage. The main reason is that when anyone
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Business Finance Summary Business Finance, Investors, Firms and Markets • Investments in assets are important because assets generate the cash flows that are needed to meet operating expenses and provide a return to owners of the business. • Financing decisions involved generating funds internally or form external sources to the business. Such as by issuing debt or equity securities. • Financing charges amount to non-operating cash flows • The required rate of return caters for the costs
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| Introduction | 04 | Objective | 04 | Asset Allocation | 05 | Macroeconomic & Industrial Scene | 07 | Diversification | 07 | Trading Strategies & Economic Rationale for Selecting Stocks | 07 | Portfolio Performance | 10 | Holding Period Return | 13 | Portfolio Risk & Return | 14 | Security Market Line | 15 | Lessons Learned from Trading | 16 | Conclusion | 17 | References | 18 | Appendix | 19 |
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