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Investment and Portfolio Analysis AssignmentsQuestion 1: Portfolio Construction for Mr. HellersYour boss has sent you another client of A.P. Investments, Mr. Hellers, who needs your help on making an investment decision. Mr. Hellers has identified two stocks, Port of Tauranga and A2 Milk Corporation, which he thinks will give him a good return on his investment. Both stocks are equally interesting to him, but he heard something about splitting eggs, or sharing risk or something like that. A.P. Investment's research department has provided you with some price information about the two specific stocks. Your boss has asked you to help Mr. Hellers in his investment decisions, by explaining to him the principle of "splitting eggs", and suggests that you do this by showing a risk-return graph for the two stocks and any portfolio that you can create from these two stocks (you can do this by constructing portfolios, by changing weights in 10% increments). Which portfolio would give Mr. Hellers the least amount of risk? Which portfolio has the highest reward-to-variability ratio? What would the optimal portfolio be? Your boss suggests you start by calculating the per annum returns and standard deviation and the correlation between the two companiesQuestion 2: Portfolio DiversificationStocks offer an expected rate of return of 10% with a standard deviation of 20%, whereas gold offers an expected return of 5% with a standard deviation of 25%.a) In light of the apparent inferiority of gold to stocks in terms of return and volatility, why would anyone want to hold gold? Illustrate it graphically. b) What would be your answer to (a) if the correlation coefficient between stocks and gold was +1? Please draw a diagram to explain.
Hyacinth Macaw invests 60% of her funds in stock I and the balance in stock J. The standard deviation of returns on I is 10 percent, and on J it is 20 percent.
Financial management is concerned with the maintenance and creation of wealth. For the risk-averse financial manager, the more risky a given course of action, the higher the expected return must be.
Stocks x and Stock y have the following probabiltiy distributionsof expected future returns: Compute the expected rate of return and standard devaiation of expected returns
Determine which of the following is not part of the lender controls used in inventory financing and find the cost of not taking the following cash discounts?
you will require to cash in at the end of ten years. suppose your brother is trustworthy and both investments carry similar risk.
The earnings for Crystal Cargo Corporation have been predicted for the next 5 years and are as follows. There is 1 million shares outstanding.
You are concerned about the firm's largest division luxury because cost has been increasing much faster than revenue for the last three years.
The Boulder Inc., just paid a dividend of $2.15 per share on its stock. The dividends are expected to grow at a constant rate of 5% per year, indefinitely.
Steve buy his home for $500,000. As a sole proprietor, he operates a certified public accounting practice in his house. For this business, he uses one room exclusively and regularly as a house office.
According to the Miller and Modigliani model dividened policy is irrelevant. However, there are numerous factors in the real world that violate the MM assumptions.
Computation of Free cash flow for the company's depreciation expense is $500,000 and it has no amortization expense.
1. Suppose you take out a margin loan for $60,000. The rate you pay is an 8.6 percent effective rate. If you repay the loan in six months, how much interest will you pay?
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