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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


Security B’s expected return


Security C’s expected return


Market return


Risk free rate of return


Market Beta




  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.



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MGT201 assignment 


thanks arsal... 


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