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Assignment On Chapter 11

This document contains summaries of questions from Chapter 11 on portfolio analysis and risk management: 1) Question 4 calculates the portfolio fraction, expected return, and percent change for a two-asset portfolio. 2) Question 7 provides the annual returns for two stocks over two different time periods. 3) Question 8 gives yearly returns and deviations for a portfolio over 4 years and calculates variance, standard deviation, and other metrics. 4) Question 11 shows yearly returns for 10 years and calculates arithmetic and geometric averages. 5) Question 14 similarly provides monthly returns over 5 months and calculates related averages and metrics. 6) Question 16 gives stock returns and deviations over 4 periods and finds averages and variance.

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52 views3 pages

Assignment On Chapter 11

This document contains summaries of questions from Chapter 11 on portfolio analysis and risk management: 1) Question 4 calculates the portfolio fraction, expected return, and percent change for a two-asset portfolio. 2) Question 7 provides the annual returns for two stocks over two different time periods. 3) Question 8 gives yearly returns and deviations for a portfolio over 4 years and calculates variance, standard deviation, and other metrics. 4) Question 11 shows yearly returns for 10 years and calculates arithmetic and geometric averages. 5) Question 14 similarly provides monthly returns over 5 months and calculates related averages and metrics. 6) Question 16 gives stock returns and deviations over 4 periods and finds averages and variance.

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SarveshSail
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Assignment on Chapter 11

Question 4:
Portfolio Fraction:

0.42857
ESJ =(50*30)/(50*30+100*20) 1
=(100*20)/ 0.57142
CSH (50*30+100*20) 9

Expected Return:
   
=100*2
ESJ =100*20 2000 3 2300
CSH =50*30 1500 =50*29 1450
Total 3500 3750

% change =(3750-3500)/3500 7.14%

Question 7:

Date Price Dividend Return % 1+Return %


01-02-2008 86.62      
02-06-2008 79.91 0.4 -0.07285 0.92715
05-07-2008 84.55 0.4 0.063071 1.06307
08-06-2008 65.4 0.4 -0.22176 0.77824
11-05-2008 49.55 0.4 -0.23624 0.76376
01-02-2009 45.25   -0.08678 0.91322

-
Annual Return 46.50%

Date Price Dividend Return % 1+Return %


01-03-2011 66.4      
02-09-2011 72.63 0.42 0.100151 1.10015
05-11-2011 79.08 0.42 0.094589 1.09459
08-10-2011 57.41 0.42 -0.26872 0.73128
11-08-2011 66.65 0.42 0.168263 1.16826
01-03-2012 74.22   0.113578 1.11358

Annual Return 14.56%


Question 8:
Year 1 2 3 4
Return -7% 23% 18% 6%
Deviation -17% 13% 8% -4%
Deviation^
2 2.89% 1.69% 0.64% 0.16%

Average =0.25*(-0.07+0.23+0.18+0.06) 10%


=(1/3)*(0.0289+0.0169+0.0064+0.001
Variance 6) 1.79%
Std dev =1.35%^0.5 13.39%

Question 11:
0.01
Ret % -0.195 0.169 0.183 -0.497 0.439 9 -0.168 0.464 0.453 -0.036
1+Ret 1.01
% 0.805 1.169 1.183 0.503 1.439 9 0.832 1.464 1.453 0.964
82.1
100 80.50 94.10 111.33 56.00 80.58 1 68.32 100.01 145.32 140.09

Arithematic 9.63 8.31


average % %
Geometric average 3.8% 3.4%

If I invest Rs 100 I shall have Rs 140 approximately at the end of 10 years.

Question 14:
Mothly return 5% 2% 4% 8% -1%
1.0
1+ Mothly return 5 1.02 1.04 1.08 0.99

Ari. Avg =0.2*(SUM(0.05+0.02+0.04+0.08-0.01)) 3.60%


Geo. Avg =PRODUCT(1.05,1.02,1.04,1.08,0.99)^(1/5)-1 3.56%
Variance =VAR(0.05,0.02,0.04,0.08,-0.01) 0.11%
std dev =STDEV(0.05,0.02,0.04,0.08,-0.01) 3.36%

Question 16:
Returns -0.04 0.28 0.12 0.04
Dev -0.14 0.18 0.02 -0.06
Dev^2 0.0196 0.0324 0.0004 0.0036

Ari. Avg =0.25*(-0.04+0.28+0.12+0.04) 0.1


Varianc =(1/3)*(0.0196+0.0324+0.0004+0.00 0.01866
e 36) 7
0.13662
std dev =0.018667^0.5 7

Question 22:
If I was a risk averse investor, I would choose to invest in the economy in which stocks move together
because the uncertainty is predictable.
If I am risk neutral, I wont mind going with any option as I shall be risk indifferent
If I am risk taker, I would like to go with the economy where the stocks are independent, wherein I
would like to maximise my returns with optimum diversification

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