answers and solution to the questions

Question Suppose Sandema is weighing the opportunity and the risk of investing in any of the two individual securities Access (X1) and Zenith Bank (X2) made of Real Estates Investment Trust (REIT) with returns as: a) Compute the expected return for each asset class. (3 Marks) b) Find the portfolio return. (2 Marks) c) Calculate the expected risks for each security and explain your results. (4 Marks) d) Calculate the coefficient of variation (CV) of the securities and explain your results. (2 Marks) e) Find the Sharpe ration and explain given riskfree rate 3.15%. f) Calculate the covariance for the securities. g) Calculate the correlation and explain the results. h) Find the portfolio risk and explain your answer. (2) Marks) (2 Marks) (2)arks) (5 Marks) (20 Total Mariks) Question Two i) Explain the functions of any four (4) intermediaries within the Capital Market. (4 Marks) ii) Distinguish between the following: a) Efficient market hypothesis and repurchase agreement (2 Marks) b) Securities market and central securities depositories (2 Marks) c) Secondary and primary market (2 Marks) iii) The Trustees of Dzolu Pension Scheme have contracted you as an Analyst to help them to use scientific method of asset allocation system for them to reconstruct their portfolio. Suppose you are given risk-retum information in the table as follow: a) Plot an efficient mronner using nsk-return trade-off. (2 Marks) b) Which of the assets class should be included in the portfolio base on your estimations? (2 Marks) iv) Suppose additional information is given with the risk-free interest rate of 4% as follow: a) Plot the Capital Asset Line. b) Find the optimal portfolio? Explain your answer. (1 Mark) (2 Marks) v) Using the assets in question (iii) to calculate the Sharp ratio for the various asset classes. (3 Marks) (20 Total Marks) Question 3 a) Discuss three money market instruments and two capital market securities (Hint: issuer, risk and retum, tenor, feature etc). (10 Marks) b) Distinguish between mutual fund and its policies from unit trust schemes. ( 5 Marks) c) Discuss real estate investment trust (REIT) in Ghana. (5 Marks) (20 Total Marks) Question4 Suppose Mr. Shineman informed you that he will be going on retirement in 5 years froin now. He wants to increase his regular contributions for the remaining periods. At the beginni.g of the 1In year, he contributed GHS 1,200 and GHS 1,450 at the beginning of the 2ad year. He increases the contributions to GHS 2,800 at the beginning of 3rt year and to GHS 3,508 at the 4t year. Towards the end of the 5th year, he could not contribute any amount but rather withdrew an amount of GHS 7.547 to settle emergence needs. The frequency of the interest rates for various years are such that they kept varying. In year 1 , it was 18.5%; year 2 , it was 17.25% and year 3 , it was 16.15% and the year 4 , it was 16.95%. (i) Using the simple interest rate, calculate the future value of Mr Shineman and explain your results in relation to the effect of the withdrawal he made getting to the end of the period. advice would you give to Mr Shineman. (iii) Calculate the quarterly compounded future value of Mr Shineman and consider the situation that he roll-over the funds at the beginning of the 5th year to the year end at a T-bill rate of 13.5% without making any withdrawal. (5 Marks) (iv) Distinguish between: a) Financial assets and real assets (2 Marks) b) Fixed income and derivatives (2 Marks) c) CAPM (2 Marks) (20 Total Marks)