it's 1 question on different pages please consider.

QUESTION ONE-MARKS On Saturday morning in line September 2013 DesireMonke wat over her breakfast, which wapidly turning cold, and relected on the performance of verpenonat investment portfolio the seven years. She real that after the financial crisis in 2015, she had been advised to avoid US stocks and to put ber saving in the emerging economies of GHANA and SA At the time, she had chosen to allocate her to two exchange de finds (ET) invested in the equity markets or CRANAM SA, namely ALUWORKS un AGA, in the ratio of percent and 40 per cent respectively. ALUWORKS wa TF invested in the public equity mure of SA The ETF invested in the stocks of large-cap companies operative across diversified sector. AGA was an ETF dut invested in the publie equity markets or GHANA. The invented in the stock of burge-cap and mid-cap companies operating som diversified sectos, and tricked the performance of the Game Stock Exchange All Share Index (GSE) Although Desiree Motorkye had been cated with her portfolio performance over the past seven years, the high growth in these two everying wurkets had fizzled out lately. However, the advice she had gathered from alysts' reports implied that she should stay invested in these markets, albeit with more attention to the volatile swings, Desiree Mofikye had enrolled in a corporate finance class at UPSA on risk and return 10 improve ber investment knowledge During her classes, Desiree Monikye learned that the risk ol's portfolio was not simply a weighted average of the individont variances of the component assets. Rather, it was determined to a large extent by the co-movement between the returns of the component sets Consequently, Desiree Mortky reasoned that diversification to include an asset that was imperfectly correlated with the existing components of her portfolio should reluce her risk without wanting return, it she had derstood correctly. With this objective in inind, Desiree Motoky started to search for an asset that was not correlated with ALUWORKS OAGA. Desiree Motskye wondered whether she should move some of her funds to US equity. The U.S. Conomy appeared to have benefitted from the rounds of quantitative casing and was finally recovering from the doldrums, Surely, the fact that the United States was picking up at a time when SA and GHANA were slowing down was indicative of low correlation among the three economies EXAMINERS: DOKU, BOADI, BOAMAH & AGOBA Page 2 of 4 Moreover, to confirm her belief, Desiree Mofakye decided to pick an ETF that tracked the US equity market. She noticed that Lyxor United States Dow Jones Industrial Average (USDJIA) was invested in the public equity markets of the United States, in the stocks of companies perating across diversified sectors, excluding transportation and utilities sectors She proceeded to gather past return data on ALUWORKS, AGA and USDJIA (see Exhibit 1). All three ETFs were listed on the Nairobi Stock Exchange. As a proxy for the market portfolio Desiree Mofukye downloaded corresponding return data for Lyxor World (see Exhibit). Lyxor World was an ETF that invested in the public equity markets of developed countries across the globe. It invested in the stocks of large-cap and mid-cap companies, and provided results that closely corresponded to the performance of the Ghana Stock Exchange All Share Index (GST). Desiree Mofakye's idea was to compare the mean returns and standard deviations of her existing portfolio with in alternative portfolio that would invest 40 per cent in SA. 30 per cent in GHANA, and 30 per cent in United States (sce Exhibit 2) She hoped that the analysis would help her decide whether to diversify her portfolio or remain invested in SA and GHANA only. In addition, she intended to compute the betas of ALUWORKS, AGA, und USDJIA using their covariance with the market proxy, which would help her figure out their required returns, assuming a risk-free rate of 2.5 per cent and a market risk premium of 55 per cent. Desiree Mofakye was excited to get started and to apply the financial concepts that she had gleaned from her corporate finance class. The class might have turned out to be her best investment yet. EXHIBIT I: ANNUAL RETURNS (%) Year ALUWORKS AGA Lyxor USDJIA Lyxor World 2009 2.00 5.86 5.56 7.69 2010 4.25 22.40 6.11 5.79 2011 -29.40 - 27.07 7.94 -3.28 2012 13.23 0.60 18.29 20.75 2013 8.86 6,84 17.09 14.14 2.31 2014 33.87 14.20 15.06 .9.28 2015 -2.96 -4.28 EXAMINERS: DOKU, BOADI, BOAMAH & AGOBA Page 3 of 4 EXHIBIT 2: PORTFOLIO WEIGHTS (%) Assets Existing New Portfolio Portfolio ALUWORK GO 20 TAGA 10 30 Lyxor 30 Required 1. Using the annual return data provided in Exhibit of the case for ALUWORKS and AGA, calculate their mean returns, standard deviations, covariance, and correlation. With these number calculate the standard deviation and return for Desiree Mofakye's entire portfolio (6 marks). 2. After adding Lyxor USDJIA, what is the portfolio's new standard deviation and return? How does the new portfolio compare with the calculation in Question 1? (6 marks). 3. Based on your data analysis, should Desiree Mofakye diversify her portfolio of remain invested in SA and GHANA only? (6 marks), 4 Calculate the betas of ALUWORKS, AGA, and Lyxor USDJTA. To calculate the covariance with the market proxy, use the Lyxor World return data shown in Exhibit in the case. Assuming a risk-free rate of 2.5 per cent and a market risk premium of 5.5 per cent, what are the required returns for each of the three ETF? (6 marks). 5.Calculate the existing portfolio's beta and the new portfolio's beta. Assuming at risk-free rate of 25 percent and a market risk premium of 55 per cent, what are the two portfolios required retums? (6 marks) Total Marks (30) Page 4 of 4 EXAMINERS: DOKU, BOADI, BOAMAH & AGOBA QUESTION ONE-MARKS On Saturday morning in line September 2013 DesireMonke wat over her breakfast, which wapidly turning cold, and relected on the performance of verpenonat investment portfolio the seven years. She real that after the financial crisis in 2015, she had been advised to avoid US stocks and to put ber saving in the emerging economies of GHANA and SA At the time, she had chosen to allocate her to two exchange de finds (ET) invested in the equity markets or CRANAM SA, namely ALUWORKS un AGA, in the ratio of percent and 40 per cent respectively. ALUWORKS wa TF invested in the public equity mure of SA The ETF invested in the stocks of large-cap companies operative across diversified sector. AGA was an ETF dut invested in the publie equity markets or GHANA. The invented in the stock of burge-cap and mid-cap companies operating som diversified sectos, and tricked the performance of the Game Stock Exchange All Share Index (GSE) Although Desiree Motorkye had been cated with her portfolio performance over the past seven years, the high growth in these two everying wurkets had fizzled out lately. However, the advice she had gathered from alysts' reports implied that she should stay invested in these markets, albeit with more attention to the volatile swings, Desiree Mofikye had enrolled in a corporate finance class at UPSA on risk and return 10 improve ber investment knowledge During her classes, Desiree Monikye learned that the risk ol's portfolio was not simply a weighted average of the individont variances of the component assets. Rather, it was determined to a large extent by the co-movement between the returns of the component sets Consequently, Desiree Mortky reasoned that diversification to include an asset that was imperfectly correlated with the existing components of her portfolio should reluce her risk without wanting return, it she had derstood correctly. With this objective in inind, Desiree Motoky started to search for an asset that was not correlated with ALUWORKS OAGA. Desiree Motskye wondered whether she should move some of her funds to US equity. The U.S. Conomy appeared to have benefitted from the rounds of quantitative casing and was finally recovering from the doldrums, Surely, the fact that the United States was picking up at a time when SA and GHANA were slowing down was indicative of low correlation among the three economies EXAMINERS: DOKU, BOADI, BOAMAH & AGOBA Page 2 of 4 Moreover, to confirm her belief, Desiree Mofakye decided to pick an ETF that tracked the US equity market. She noticed that Lyxor United States Dow Jones Industrial Average (USDJIA) was invested in the public equity markets of the United States, in the stocks of companies perating across diversified sectors, excluding transportation and utilities sectors She proceeded to gather past return data on ALUWORKS, AGA and USDJIA (see Exhibit 1). All three ETFs were listed on the Nairobi Stock Exchange. As a proxy for the market portfolio Desiree Mofukye downloaded corresponding return data for Lyxor World (see Exhibit). Lyxor World was an ETF that invested in the public equity markets of developed countries across the globe. It invested in the stocks of large-cap and mid-cap companies, and provided results that closely corresponded to the performance of the Ghana Stock Exchange All Share Index (GST). Desiree Mofakye's idea was to compare the mean returns and standard deviations of her existing portfolio with in alternative portfolio that would invest 40 per cent in SA. 30 per cent in GHANA, and 30 per cent in United States (sce Exhibit 2) She hoped that the analysis would help her decide whether to diversify her portfolio or remain invested in SA and GHANA only. In addition, she intended to compute the betas of ALUWORKS, AGA, und USDJIA using their covariance with the market proxy, which would help her figure out their required returns, assuming a risk-free rate of 2.5 per cent and a market risk premium of 55 per cent. Desiree Mofakye was excited to get started and to apply the financial concepts that she had gleaned from her corporate finance class. The class might have turned out to be her best investment yet. EXHIBIT I: ANNUAL RETURNS (%) Year ALUWORKS AGA Lyxor USDJIA Lyxor World 2009 2.00 5.86 5.56 7.69 2010 4.25 22.40 6.11 5.79 2011 -29.40 - 27.07 7.94 -3.28 2012 13.23 0.60 18.29 20.75 2013 8.86 6,84 17.09 14.14 2.31 2014 33.87 14.20 15.06 .9.28 2015 -2.96 -4.28 EXAMINERS: DOKU, BOADI, BOAMAH & AGOBA Page 3 of 4 EXHIBIT 2: PORTFOLIO WEIGHTS (%) Assets Existing New Portfolio Portfolio ALUWORK GO 20 TAGA 10 30 Lyxor 30 Required 1. Using the annual return data provided in Exhibit of the case for ALUWORKS and AGA, calculate their mean returns, standard deviations, covariance, and correlation. With these number calculate the standard deviation and return for Desiree Mofakye's entire portfolio (6 marks). 2. After adding Lyxor USDJIA, what is the portfolio's new standard deviation and return? How does the new portfolio compare with the calculation in Question 1? (6 marks). 3. Based on your data analysis, should Desiree Mofakye diversify her portfolio of remain invested in SA and GHANA only? (6 marks), 4 Calculate the betas of ALUWORKS, AGA, and Lyxor USDJTA. To calculate the covariance with the market proxy, use the Lyxor World return data shown in Exhibit in the case. Assuming a risk-free rate of 2.5 per cent and a market risk premium of 5.5 per cent, what are the required returns for each of the three ETF? (6 marks). 5.Calculate the existing portfolio's beta and the new portfolio's beta. Assuming at risk-free rate of 25 percent and a market risk premium of 55 per cent, what are the two portfolios required retums? (6 marks) Total Marks (30) Page 4 of 4 EXAMINERS: DOKU, BOADI, BOAMAH & AGOBA