Problem 1:

Discuss why it is advisable to invest in a group of financial assets instead of investing in only one, even though this, on average, has offered a high historical return (generally, above the market return).

Problem 2:

Mention and discuss at least two strategies that can be used to achieve a diversified investment portfolio.

Problem 3:

Use the data from the following four actions to answer the questions below:

Yields

Year TLS DI PFE WMT

20x5 12.00% 4.50% 5.80% 11.30%

20x6 13.30% 5.30% 5.70% 9.00%

20x7 10.20% 3.10% 5.90% 13.90%

20x8 9.30% 2.70% 4.50% 14.80%

20x9 8.60% 1.90% 6.30% 15.00%

a. Classify the correlations between each pair of actions as positive correlation (CP), perfectly positive correlation (CPP), negative correlation (CN), perfectly negative correlation (CPN) and no correlation (SC):

TLS - DI ___________ DI - PFE __________

TLS - PFE __________ DI - WMT _________

TLS - WMT _________ PFE - WMT _________

b. What are the three actions combined to build a diversified portfolio and why? It starts from the premise that there is an equal distribution of investment (33.3%) among the selected shares.

C. Calculate the return, risk and coefficient of variation for the portfolio of three stocks selected in the previous exercise. It starts from the premise that there is an equal distribution of investment (33.3%) among the selected shares.