Question (b)

Question a (ii)

Please note that your response should be presented so as to provide useful information to the decision-maker. Hence, the marks awarded include those for full explanations and critical analysis relevant to the finance decision context, not just the computations alone. 2256 OVESBODO 5. Premi o Vodowane (a) tudo 012 (1) Advise Sebastian as to whether his existing portfolio lies on the nu Efficiency Frontier. Please explain your results clearly. con alitsi (14 marks) fub (i) Apply the capital asset pricing model to assess each of the ai i vi svarbis to securities being considered for investment. Use your results to spre vom pristu advise Sebastian on the preferred strategy and state your Subo vo assumptions. Seb meix single ned 200 VESTED Ola anlat157 (22 marks) To rum ni au boonen (1) Derive the likely return and risk (both systematic and total) of the 15 var br new portfolio advised in part (ii) above. Assume that the relevantodid 0073 000,00 correlation coefficient is 0.8. MIA er niriose goasis bou loannimon 1302010 3 16 I n deboldom (24 marks) (iv) How might your advice change if you considered that there was mundipo ni likely to be a downturn in the Stock Market? (12 marks) (b) VEinsan Consider the suggested debenture security investment: onnon (0) If an effective annualised return of 10.25% is required from this debenture, then what should be the market value ex int., at the end of June 2020? (14 marks) (6) Explain how such an investment might affect the risk position of Sebastian's portfolio. (14 marks) boonopolegimus qui lo sular alto ) Turn over (a) o Rexisting portfolio - on R1 + (Em -p) Bp = 10% + (20/108) 143211 efficiency frontier. Eguty! 2 CAPM. Rio 10%+20%-10%) 1.2 R2 107 421-10%) 0.9 227 19.7 24%