HELLO,

PLEASE JUST SOLVE QUESTION 3.

THANK YOU.

Question 1 (40%) The excel file Q1 contains data on the share price of GSK and Easy Jet. 1(a) Using the share returns for the period 16 March 2006 to 1 December 2017, and the methods you have studied in lectures 1, 2 and 3, calculate the minimum variance portfolio. [10% of total marks] 1(b) For the portfolio you formed in Part (a), examine the performance over the period 16 March 2006 to 1 December 2011. Comment on your results. [10% of total marks] 1c) Using the share returns for the period 16 March 2006 to 1 December 2017, and the methods you have studied in lectures 1, 2 and 3, construct an efficient frontier consisting of GSK shares and Easy Jet shares (10% of total marks). Assume at the time the yield on Gilt was 0.01%, using this as a riskless lending and borrowing rate, calculate the shape ratio and show the tangency portfolio (10% of total marks). Question 2 (30% of total marks) The excel file Q2 contains data on the share price of GSK and FTS100. Using the share returns and the return on the market index for the period 1 March 2004 to 29 Feb 2008, estimate the parameters of the single-index model for GSK. where is the return on asset / (i = 1 for GSK), is the return on the market index, and is a random disturbance. Comment on your results [30% of total marks] Question 3 (30% of total marks) In October 2017 the yield on ten-year bonds issued by the government in Italy was 2.2 per cent. In November 2017 the yield was 1.7 per cent (source: www.bloomberg.com). Predict the effect of these changes in yield on the price of the ten-year government bonds assume a face value, 1000. You will need to calculate duration, modified duration, convexity and clearly explain your results. 130% of tota