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MGT201 Assignment No 01 Fall 2019 Solution & Discussion

MGT201 Financial Management Assignment 1 Solution & Discussion Fall 2019


Financial Management- MGT201 

Assignment #01                                    Marks = 20

 

Portfolio Risk and Return Analysis

Diversification is considered as a key to reduce portfolio risk. Investors and portfolio managers try to construct an efficient portfolio with an aim to maximize return by keeping the risk at minimum level. In this process, the decision to include any security in a portfolio depends on many factors, among which risk and return of securities are at top. Along with risk and return of individual securities, it is also important to consider the correlation among portfolio securities as the key to diversification is to add un-correlated or negatively correlated securities in the portfolio that can help in reducing the risk. Considering this information about diversification and portfolio construction, you are required to construct equally weighted portfolios of two securities with all possible combination of securities. From the market analysis, following information is available about three securities:

Security A’s expected return

15%

Security B’s expected return

16%

Security C’s expected return

10%

Market return

15%

Risk free rate of return

12%

Market Beta

1

 

Requirements:

  1. List down all possible portfolios consisting of different combination of 2 securitiesHint: Portfolio 1 = Security A + Security B
  2. Calculate expected return for each possible
  3. Calculate beta for each possible portfolio (calculation of individual stock betas is also mandatory).
  4. Identify the portfolio that is riskier than

 

NOTE: Formula and calculations are mandatory in each part as these carry marks.

 

IMPORTANT NOTE: 

24 hours extra / grace period after the due date is usually available to overcome uploading difficulties. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.

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  • You may also compose your assignment in Open Office format
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RULES FOR MARKING 

  • Please note that your assignment will not be graded or graded as Zero (0), if:
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  • The file you uploaded does not open or is
  • It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF
  • Not submitted as per given format
  • It is cheated or copied from other students, internet, books, journals

 

Note related to load shedding: Please be proactive.

 

Dear students,

As you know that semester activities have started and load shedding problem is also prevailing in our country. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments or GDBs.

 

 

Best of Luck!!

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