Risk assessment - portfolio management, Risk Management

1. You are given the following long-run annual rates of return for alternative investment instruments:

  • US Government T-Bills 3.5%
  • Large-cap common stocks 12.1%
  • Long-term corporate bonds 6.2%
  • Long-term government bonds 5.6%
  • Small-capitalization common stock 14.6%

The annual rate of inflation during the period was 2.9%.  Compute the real rate of return on these investment alternatives.

2. The following are the monthly rates of return for TECO Electric and Gold Hill

1393_Risk Assessment - Portfolio Management.png

            Using an excel spreadsheet, compute the following:

a.       Average monthly rate of return for each stock

b.      Standard deviation of returns for each stock

c.       Covariance between the rates of return

d.      The correlation coefficient between the rates of return

3. Based on five years of monthly data, you derive the following information for the companies listed:

995_Risk Assessment - Portfolio Management1.png

a.   Compute the beta coefficient for each stock

b.  Assuming a risk free rate of 5 percent and an expected return for the market portfolio of 12 percent, compute the expected (required) return for all the stocks.

c.   Plot the following estimated returns for the next year on the SML and indicate which stocks are undervalued or overvalued.

  • Johnson and Johnson-15%
  • Exxon Mobil-10%
  • Pfizer-13%
  • Microsoft-20%

4.  The following are the historic returns for the Columbia Sportswear Company (COLM) and the General Index:

1207_Risk Assessment - Portfolio Management2.png

Based on this information, and using an excel software, compute the following:

a.  The correlation coefficient between COLM and the General Index.

b.  The standard deviation for the company and the Index

c.  The beta for the COLM.

Posted Date: 3/8/2013 5:15:36 AM | Location : United States







Related Discussions:- Risk assessment - portfolio management, Assignment Help, Ask Question on Risk assessment - portfolio management, Get Answer, Expert's Help, Risk assessment - portfolio management Discussions

Write discussion on Risk assessment - portfolio management
Your posts are moderated
Related Questions
Enumerate about the Purchasing Power Risk A factor affecting all securities is purchasing power risk, also termed as inflation risk. With uncertain inflation, real (inflatio

Question 1: (i) Define the following by giving an example: (a) Systemic risk (b) Diversifiable risk (ii) List and describe briefly the different types of ri

Hi I would like to know how you could assist on subject title assignment and pricing

On 1 October 2010, a company issued at par $30 million (par value) of fixed rate 6% debenture loans to the market at par. Interest on the debenture loans is paid quarterly on the l

Explain in brief about the Default Risk It's that portion of an investment's total risk which results from changes in the financial integrity of the investment. For instance

Fire Risk model 1 1. Introduction The new All-Scotland Fire Authority wishes to maximise the effectiveness of the service it provides to the Public, given the reduced budget it w

the difference between binomial model and black-scholes formulation of derivative pricimg

Systematic Risk Systematic risk is any risk which affects the value of a huge number of assets; therefore, each asset will have a various degree of sensitivity to the underlyin

what will be the number one credential for risk management?

Question: Under Section 6 of the Occupational Safety and Health Act 2005, employers have a statutory duty to prepare and keep revised a written statement of their safety and he