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    Investment & Portfolio MGT Assignment

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    Agidew Shewalemi
    This document contains an assignment for an investment analysis and portfolio management course. It includes 8 questions related to calculating expected returns, risk measures like standard deviation and covariance, bond and stock pricing, and portfolio analysis. Specifically, it asks students to calculate these measures for individual stocks and bonds, as well as a two-stock portfolio. The questions provide historical or projected financial data for the securities and require computational analysis to answer.

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    Investment & Portfolio MGT Assignment

    Uploaded by

    Agidew Shewalemi
    225 views2 pages
    This document contains an assignment for an investment analysis and portfolio management course. It includes 8 questions related to calculating expected returns, risk measures like standard deviation and covariance, bond and stock pricing, and portfolio analysis. Specifically, it asks students to calculate these measures for individual stocks and bonds, as well as a two-stock portfolio. The questions provide historical or projected financial data for the securities and require computational analysis to answer.

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    This document contains an assignment for an investment analysis and portfolio management course. It includes 8 questions related to calculating expected returns, risk measures like standard deviation and covariance, bond and stock pricing, and portfolio analysis. Specifically, it asks students to calculate these measures for individual stocks and bonds, as well as a two-stock portfolio. The questions provide historical or projected financial data for the securities and require computational analysis to answer.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    225 views2 pages

    Investment & Portfolio MGT Assignment

    Uploaded by

    Agidew Shewalemi
    This document contains an assignment for an investment analysis and portfolio management course. It includes 8 questions related to calculating expected returns, risk measures like standard deviation and covariance, bond and stock pricing, and portfolio analysis. Specifically, it asks students to calculate these measures for individual stocks and bonds, as well as a two-stock portfolio. The questions provide historical or projected financial data for the securities and require computational analysis to answer.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 2

    HARAMAYA UNIVERSITY

    DEPARTMENT OF ACCOUNTING AND FINANCE


    Assignment- for the course Investment Analysis & Portfolio Management
    For: 4th year Regular Program
    Prepared by: Nesredin Yakob
    1. Use the information below to answer the following questions
    State Probability Return on Return on Return on
    Stock A (%) Stock B (%) Stock C (%)
    1 15% 20 10 -5
    2 25% 15 12 8
    3 10% 16 15 15
    4 30% -10 20 25
    5 20% 18 25 22
    A) Find the covariance between the returns of stocks A,B and C
    B) Find the correlation coefficients between the returns of stocks A,B and C
    C) Find the portfolio expected return.
    D) Find portfolio expected risk.
    2. Suppose the price of a bond with a par value of Br 1,000 to be paid in ten years, a coupon
    rate of 12%, and a required yield of 10%. Assume that coupon payments are made quarterly
    to bond holders. Calculate the price of the bond.
    3. Assume a stock which pays a $ 3.5 dividend current year is expected to grow at 15% in the
    first year, 18% in the second year, 20% in the third year, 22% in the fourth year , and
    then at a constant rate of 10% into the future, the discount (required rate of return) is 15%.
    Calculate the price of the stock.
    4. Mr. Red invested in equity shares of White Ltd., its anticipated returns and associated
    probabilities are given below:
    Return (%) -15 -10 5 10 15 20 30
    Probability 0.05 0.10 0.15 0.25 0.30 0.10 0.05
    You are required to calculate the expected rate of return and risk in terms of standard
    deviation and coefficient of variation
    5. The rate of return of equity shares of blue Ltd., for past six years are given below:
    Year 01 02 03 04 05 06
    Rate of return (%) 20 18 -8 22 30 32
    Calculate the average rate of return, variance and standard deviation and coefficient of
    variation

    1
    6. Compute the historical or average return and risk (standard deviation and coefficient of
    variation) for Varun company based on the following given:

    Year Return (%)


    1 15
    2 6
    3 9
    4 18
    5 12
    7. The projected annual dividends for the coming five year for AWASH Intern cor. are
    presented as follows:
    In the year 2010 $20
    2011 $22
    2012 $23
    2013 $26
    2014 $29
    The estimated annual growth rate of dividend for year 2015 and beyond is 6%
    The capitalization rate is 12% during the initial variable growth period
    Required: Compute the value of AWASH’s share using the variable growth model
    8. Suppose you have the following information about the returns for the securities of Super Lux
    plc Stock and the returns of Q-mart stock and their probabilities for different states is also
    given as follows:
    State of economy Probability of Super Lux stock Q-mart stock
    state occurring return % return %

    Depression 0.1 3 -5

    Recession 0.2 10 6

    Normal 0.5 20 15

    Boom 0.2 30 20
    a) Compute the expected return of the Super Lux stock & Q-mart stock
    b) Compute the standard deviation of the Super Lux stock & Q-mart stock
    c) Compute the covariance of the returns between the Super Lux stock & Q-mart stock
    d) Compute the correlation between the Super Lux stock & Q-mart stock
    e) Compute the expected return of the portfolio if the investor decides to put his fund
    equally for both company stocks (half in Q-mart half in Super Lux stock)
    f) Determine the standard deviation of portfolio if the investor decides to put his fund
    equally for both company stocks (half in Q-mart half in Super Lux stock)

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