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Financial Economics Assignment One, Semester One, 2020 Submit Assignment Due 12 Apr by 23:59 Points 10 Submitting a file upload Available 2 Mar at 0:00
Financial Economics Assignment One, Semester One, 2020 Submit Assignment Due 12 Apr by 23:59 Points 10 Submitting a file upload Available 2 Mar at 0:00 - 20 Jun at 23:59 4 months You are an investment manager considering two mutual funds. The first is an equity fund and the second is a long-term corporate bond fund. It is possible to borrow or to lend limitless sums safely at 1.25%pa. The data on the risky funds are as follows: Fund Expected return Expected standard deviation Equity Fund 8% 16% Bond Fund 3% 5% C Your client wants to invest a proportion of his total investment budget in your risky portfolio identified in part (a) to provide an expected rate of return on his complete portfolio equal to 8%. What proportion should he invest in the risky portfolio and how should this be funded? What is the risk of his combined portfolio? Mark this portfolio onto your portfolio's CAL. Show your working. (3 marks) d Your client's degree of risk aversion is A = 6. What proportion, y, of his total investment should be invested in your risky portfolio? What is the expected return and standard deviation of the rate of return on your client's optimized portfolio Show your working (3 marks) Financial Economics Assignment One, Semester One, 2020 Submit Assignment Due 12 Apr by 23:59 Points 10 Submitting a file upload Available 2 Mar at 0:00 - 20 Jun at 23:59 4 months You are an investment manager considering two mutual funds. The first is an equity fund and the second is a long-term corporate bond fund. It is possible to borrow or to lend limitless sums safely at 1.25%pa. The data on the risky funds are as follows: Fund Expected return Expected standard deviation Equity Fund 8% 16% Bond Fund 3% 5% C Your client wants to invest a proportion of his total investment budget in your risky portfolio identified in part (a) to provide an expected rate of return on his complete portfolio equal to 8%. What proportion should he invest in the risky portfolio and how should this be funded? What is the risk of his combined portfolio? Mark this portfolio onto your portfolio's CAL. Show your working. (3 marks) d Your client's degree of risk aversion is A = 6. What proportion, y, of his total investment should be invested in your risky portfolio? What is the expected return and standard deviation of the rate of return on your client's optimized portfolio Show your working
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