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How you would approach measuring portfolio performance

Assignment Help Portfolio Management
Reference no: EM132348391

A1.

Portfolio measurement answers three questions:

1) What is the return on the assets?

2) Why the portfolio has returned in the way it has.

3) How can the performance be improved?

Explain, in detail, how you would approach measuring portfolio performance. Extend your discussion beyond a simple list, by providing detailed measures you would use in the process and why.

A2.

1. Shares in the Marrero Corporation are trading at $25. In one year, the per share price could be $20 or $30. One year to maturity T-bills are paying 10 per cent.
a.
a. What is the value of the call option with a $20 exercise price?
b. What is the value of the call option with a $26 price?

2. Estelle, Inc. convertible bond issue is selling on the market at $950. Each bond can be converted to 100 shares of the company at the option of the bond holder. The bond is burdened with a 7 per cent annual coupon with a 10 year maturity. The debt is BBB rated. Furthermore, the debt with BBB rating is priced to yield 12 per cent. Currently the shares in Estelle are trading at $7. With respect to the Estelle's bond, what is:
a. the conversion ratio on the bond
b. conversion price
c. conversion premium
d. floor value and
e. value of the option?

• References:
• Bacon, C.R. (2008). Introduction. In Practical portfolio performance: Measurement and attribution (pp. 1-4). Retrieved from EBSCO eBook Collection in the Touro library.
• Options. (2008). In Corporate finance.

B1.

Discuss the following questions below as it pertains to Cost of Capital.

1. Discuss why does the market value of the claims on the assets of a firm equal the market value of the assets

2. Why do analysts care about the current cost of long-term debt when estimating a firm's cost of capital?

B2.

Discuss the following questions below as it pertains to Cost of Capital. Comment on one of your classmate's post.

1. Which is easier to calculate directly, the expected rate of return on the assets of a firm or the expected rate of return on the firm's debt and equity? Assume that you are an outsider to the firm.

2. Discuss why the after-tax cost of equity (common or preferred) does not have to be adjusted by the marginal income tax rate for the firm.

Attachment:- Portfolio Management.rar

Reference no: EM132348391

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Reviews

len2348391

7/30/2019 12:26:36 AM

Pls do not include introduction & table of content. Just answer the questions. Extend your discussion beyond a simple list, by providing detailed measures you would use in the process and why.

Write a Review

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