please help with my investment assignmentsubmission date is tomorrow i am stuck

SPECIAL ASSIGNMENT - JANUARY 2016 INTAKE PROGRAMME: MBA MODULE: INVESTMENT AND PORTFOLIO MANAGEMENT DUE DATE: 28 April 2016 Read the case study below and answer the question that follows: FIRST THINGS FIRST If you want dazzling investment results, don't start your day foraging for hot stocks and stellar mutual funds. Instead, say investment advisers, the really critical decision is how to divvy up your money among stocks, bonds, and super safe investments such as Treasury bills. In Wall Street lingo, this mix of investments is called your asset allocation. \"The assetallocation choice is the first and most important decision,\" says William Droms, a finance professor at Georgetown University. \"How much you have in [the stock market] really drives your results.\" \"You cannot get [stock market] returns from a bond port- folio, no matter how good your security selection is or how good the bond managers you use,\" says William John Mikus, a managing director of Financial Design, a Los Angeles investment adviser. For proof, Mr. Mikus cites studies such as the 1991 analysis done by Gary Brinson, Brian Singer and Gilbert Beebower. That study, which looked at the 10-year results for 82 large pension plans, found that a plan's asset- allocation policy explained 91.5% of the return earned. Designing a Portfolio Because your asset mix is so important, some mutual fund companies now offer free services to help investors design their portfolios. Gerald Perritt, editor of the Mutual Fund Letter, a Chicago newsletter, says you should vary your mix of assets depending on how long you plan to invest. The further away your investment horizon, the more you should have in stocks. The closer you get, the more you should lean to- ward bonds and money-market instruments, such as Treasury bills. Bonds and money-market instruments may generate lower returns than stocks. But for those who need money in the near future, conservative investments make more sense, because there's less chance of suffering a devastating short-term loss. Summarizing Your Assets \"One of the most important things people can do is summarize all their assets on one piece of paper and figure out their asset allocation,\" says Mr. Pond. Once you've settled on a mix of stocks and bonds, you should seek to maintain the target percentages, says Mr. Pond. To do that, he advises figuring out your asset allocation once every six months. Because of a stock-market plunge, you could find that stocks are now a far smaller part of your portfolio than you envisaged. At such a time, you should put more into stocks and lighten up on bonds. When devising portfolios, some investment advisers consider gold and real estate in addition to the usual trio of stocks, bonds and money-market instruments. Gold and real estate give \"you a hedge against hyperinflation,\" says Mr. Droms. \"But real estate is better than gold, because you'll get better long-run returns.\" Source: Karabell, Z. (2009).The Case for Derivatives,\" Newsweek, February 2,2009. QUESTION 1 [20] In the context of the given extract, critically discuss the merits and criticisms of Efficient Market Hypothesis (EMH) and the development of behaviours finance, in the context of capital market theory QUESTION 2 [20] \"If you want dazzling investment results, don't start your day foraging for hot stocks and stellar mutual funds. ...... the really critical decision is how to divvy up your money among stocks, bonds, and super safe investments such as Treasury bills\". From this extract, discuss how derivatives can be used as part of a well-designed portfolio strategy for risk management. QUESTION 3 [20] Complete the 2015 balance sheet for Sutherland Industries using the information that follows. Balance Sheet Sutherland Industries December 31, 2015 Cash R60 000 Accounts payable Marketable 50 000 Notes payable R240 000 securities Accounts Accruals 40 000 receivable Inventories Total current liabilities Total current Long-term debt assets Net fixed assets Stockholders' equity Total assets Total liabilities & owners' 1 200 000 equity The following financial data for end 2015 is also available: i. Sales totaled R3 600 000. ii. The gross profit margin was 25%. iii. Inventory turnover was 6.0. iv. There are 360 days in the year. v. The average collection period is 40 days. vi. The current ratio was 1.60. vii. The total asset turnover ratio was 1.20. viii. The debt ratio was 60%. QUESTION 4 [20] Frank, an institutional investor, expects that the price of Old Mutual plc stock to be R59.77 per share a year from now. Its current market price is R50, and the expected dividend payout one year from now is R2.15 per share. Required: 4.1 What is the stock's expected dividend yield, rate of price appreciation, and holding period rate? (6) 4.2 If the stock has a beta of 1.15, the risk free rate of 6% per year, and the expected rate of return on the market portfolio is 14% per year, then calculate the required rate of return on Old Mutual plc's stock. 4.3 (2) Calculate the intrinsic value of Old Mutual plc stock, and comment on how it compares to the current market price. 4.4 (4) Old Mutual plc's stock dividend at the end of this year is expected to be R2.15, and it is expected to grow at 11.2% per year forever. Calculate the intrinsic value based on the required rate of return calculated in (4.2) above. 4.5 (2) If Old Mutual's current market price is equal to this intrinsic value, what would be the next years expected price (hint: use the information from 4.4 above). 4.6 (3) If the investor were to buy Old Mutual stock now and sell it after receiving the R 2.15 dividend a year from now, what is the expected capital gain in percentage terms ?What would be the dividend yield and the holding period return? QUESTION 5 (3) [20] MacApple is considering putting together a portfolio containing two assets, A and B. Asset A will represent 40% of the Rand value of the portfolio, and asset B will account for the other 60% The expected returns over the next three years for each of these assets are given below: Expected return % Year Asset A Asset B 2010 14 18 2011 16 16 2012 17 14 5.1 Calculate the expected portfolio return E(rp), for each of the three years. (4) 5.2 Calculate the expected value of portfolio returns over the three year period. (3) 5.3 Calculate the standard deviation of expected portfolio returns over the three year period. 5.4 (10) How would you characterize the correlation of returns of the two assets A and B? (3) END OF ASSIGNMENT