Conclusion (1 page - 8 points) This is the other core component of the project. It requires concise, constructive writing to accomplish the goal in the limited space suggested. Evaluate the investment outlook for the bond in the current interest rate environment. What is the probability that the bond will be called? Make a recommendation (sell, hold, buy, buy only for aggressive investors) for the bond you analyze. Your recommendation should be based on the bond's different yields, duration, company
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the equity portfolio Analysis: 1. Suppose Sharpe's position had been 99 percent of equity funds invested in the S&P500 and either one percent in Reynolds or one percent in Hasbro. Estimate the resulting portfolio position. How does each stock affect the variability of the equity investment? Which stock appears to be the riskiest? Let A (and B) be the portfolio with 99% of S&P 500 and 1% of Reynolds (and 1% Hasbro). | S&P 500 | Reynolds | Hasbro | Portfolio A | Portfolio B | Mean
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Group Assignment Application of Portfolio Theory Semester 2, 2013 Total Marks: 40 Percentage Weighting: 20 % Investment Guidelines You are required to construct an Equity Investment Portfolio with the following specifications: Market: Australia Portfolio Size: $1 Million Portfolio Composition: 4 assets; must be shares of companies listed on the ASX Asset Allocation: Direct Investment in equities Time Horizon: 5 years commencing January 1st, 2008 to January 1st
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• This chapter sets forth the principles of modern portfolio theory. • The expected return and variance on a portfolio of two securities A and B are given by • By varying wA, one can trace out the efficient set of portfolios. We graphed the efficient set for the two-asset case as a curve, pointing out that the degree of curvature reflects the diversification effect: the lower the correlation between the two securities, the greater the diversification. • The same general shape holds
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Cheryl Mew FINS2624 – Portfolio Management Semester 1, 2011 L ECTURE 1 – B OND PRICING W HAT IS A BOND? A bond is a claim on some fixed future cash flows. A commonwealth government bond (CGB) is a bond which pays semi-annual coupons, in which the maturity date/ coupon payment date is on the 15th of every month. A zero coupon bond is a bond with no coupons. The important information of a bond: 1. 2. 3. 4. 5. 6. Transaction date: T Settlement date:T+2 Coupon payment dates
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risk aversion for investors Textbook Example: Basic Food’s Price up to $150 from $100 Sale.com Price down to $75 from 100. Difference in return, 20%-10%= Risk Premium Risk in Portfolio Context Expected return on portfolio=Weighted expected return=rp=i=1nwiri Portfolio Risk Stocks can be combined into portfolios which then become less risky to riskless depending on the correlation of the assets. Stocks with a ρ=-1 are perfectly negatively correlated. The inverse is positively correlated.
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security’s non-diversifiable risk and diversifiable risk is called total risk. Systematic risk is beyond the control of shareholders and cannot be alleviated to a large extent. Dissimilarity to this, the unsystematic risk can be alleviated through portfolio diversification. It is a risk that can be avoided and the market does not pay for taking such risk. Explain why the total risk of a
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realized return is the amount of actual gains that is made on the value of a portfolio over a specific evaluation period. This takes into consideration any earnings generated by each of the assets contained in the portfolio, as well as any losses that were incurred as a result of a shift in the value of the individual assets. It is possible to identify the realized return associated with each asset that is held in the portfolio. Components of realized return are expected return, changes in expectations
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China's State Capitalism Trap The current international financial economic issue being witnessed is state capitalism. This is a situation where the government owns most of the profit generating enterprises, controlling the shares, acts as a large capitalist and principal shareholder. State capitalism is evident in China, and it is escalating as a threat to its economic growth. China’s powerful companies like, China Mobile, Sinopec, and PetroChina are largely controlled by the state. According
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TOPIC THREE PORTFOLIO THEORY AND CAPITAL ASSET PRICING MODEL (CAPM) Reading : BKM: Chapters 7&9 Pilbeam: Chapters 7&8 OUTLINE Section I: The concept of portfolio and diversification Calculate portfolio expected return Measuring portfolio total risk: variance and standard deviation Market portfolio Measuring systematic risk: Beta Section II: Markowitz Portfolio Theory Efficient portfolio and Efficient Frontier Capital Asset Pricing Model - CAPM CAPM lines: CML and SML
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