Question
Rows below show the monthly closing prices of three stocks between 2012 and 2018. The data were collected from Yahoo Finance. When answering these questions,
Rows below show the monthly closing prices of three stocks between 2012 and 2018. The data were collected from Yahoo Finance. When answering these questions, ignore dividends and assume all prices are in the same currency.
Date | Rio Tinto Ltd (RIO.AX) | Apple Inc. (AAPL) | Cathay Pacific Airlines (0293.HK) |
Jul-2012 | 49.24 | 87.99 | 12.64 |
Aug-2012 | 53.36 | 95.11 | 12.62 |
Sep-2012 | 56.94 | 95.88 | 14.04 |
Oct-2012 | 58.75 | 85.46 | 13.62 |
Nov-2012 | 66.01 | 84.81 | 14.22 |
Dec-2012 | 66.36 | 79.12 | 15.06 |
Jan-2013 | 67.05 | 65.59 | 14.48 |
Feb-2013 | 57.20 | 62.57 | 13.28 |
Mar-2013 | 55.80 | 63.13 | 13.64 |
Apr-2013 | 55.18 | 63.49 | 14.48 |
May-2013 | 52.37 | 64.39 | 13.56 |
Jun-2013 | 57.51 | 57.53 | 14.36 |
Jul-2013 | 58.30 | 65.11 | 13.30 |
Aug-2013 | 61.74 | 70.44 | 15.20 |
Sep-2013 | 63.99 | 68.35 | 15.38 |
Oct-2013 | 66.06 | 74.86 | 16.42 |
Nov-2013 | 68.18 | 79.71 | 16.40 |
Dec-2013 | 65.64 | 79.38 | 16.10 |
Jan-2014 | 66.84 | 71.80 | 15.80 |
Feb-2014 | 63.55 | 74.77 | 14.46 |
Mar-2014 | 61.70 | 76.82 | 14.64 |
Apr-2014 | 59.30 | 84.57 | 14.12 |
May-2014 | 59.31 | 90.57 | 14.48 |
Jun-2014 | 66.38 | 93.52 | 14.72 |
Jul-2014 | 62.63 | 94.90 | 14.40 |
Aug-2014 | 59.58 | 103.06 | 14.30 |
Sep-2014 | 60.41 | 100.59 | 14.54 |
Oct-2014 | 59.10 | 108.22 | 17.08 |
Nov-2014 | 58.00 | 118.81 | 16.90 |
Dec-2014 | 57.56 | 111.39 | 18.10 |
Jan-2015 | 64.41 | 118.05 | 17.40 |
Feb-2015 | 57.23 | 129.25 | 17.94 |
Mar-2015 | 57.15 | 124.82 | 19.98 |
Apr-2015 | 58.20 | 126.10 | 19.86 |
May-2015 | 53.75 | 130.28 | 19.06 |
Jun-2015 | 52.86 | 126.90 | 18.34 |
Jul-2015 | 50.29 | 121.50 | 14.00 |
Aug-2015 | 48.60 | 110.15 | 14.52 |
Sep-2015 | 50.65 | 109.07 | 15.44 |
Oct-2015 | 45.91 | 120.80 | 13.68 |
Nov-2015 | 44.71 | 118.75 | 13.42 |
Dec-2015 | 39.13 | 102.61 | 12.18 |
Jan-2016 | 40.28 | 96.47 | 12.40 |
Feb-2016 | 42.69 | 97.65 | 13.42 |
Mar-2016 | 51.55 | 108.78 | 12.40 |
Apr-2016 | 44.69 | 93.97 | 12.16 |
May-2016 | 45.50 | 99.02 | 11.32 |
Jun-2016 | 49.56 | 95.49 | 12.60 |
Jul-2016 | 47.60 | 104.41 | 11.16 |
Aug-2016 | 51.61 | 106.14 | 10.80 |
Sep-2016 | 54.18 | 112.71 | 10.22 |
Oct-2016 | 57.75 | 113.46 | 10.50 |
Nov-2016 | 59.90 | 110.37 | 10.24 |
Dec-2016 | 66.68 | 115.80 | 10.54 |
Jan-2017 | 61.99 | 127.03 | 11.40 |
Feb-2017 | 60.46 | 137.89 | 11.28 |
Mar-2017 | 60.44 | 143.71 | 11.20 |
Apr-2017 | 62.81 | 145.10 | 11.40 |
May-2017 | 63.27 | 153.17 | 12.12 |
Jun-2017 | 65.79 | 144.88 | 12.24 |
Jul-2017 | 67.84 | 149.10 | 11.62 |
Aug-2017 | 66.53 | 164.80 | 11.80 |
Sep-2017 | 69.45 | 154.26 | 13.34 |
Oct-2017 | 70.95 | 169.87 | 12.00 |
Nov-2017 | 75.81 | 169.95 | 12.12 |
Dec-2017 | 76.85 | 170.16 | 12.42 |
Jan-2018 | 81.16 | 167.17 | 13.26 |
Feb-2018 | 72.70 | 178.54 | 13.54 |
Mar-2018 | 79.86 | 166.64 | 12.64 |
Apr-2018 | 82.97 | 166.41 | 12.78 |
May-2018 | 83.44 | 187.99 | 12.34 |
e. (4 marks) Suppose that you were to invest 65% in Apple Inc., 25% in Rio Tinto Ltd and 10% in Cathay Pacific Airlines. Calculate the portfolio expected return, variance and standard deviation.
f. (4 marks) How would the expected return and standard deviation change if you decided to invest 20% in Rio Tinto Ltd, 25% in Apple Inc. and 55% in Cathay Pacific Airlines? Explain your answers. g. (5 marks) Find the weights of Apple Inc., Rio Tinto Ltd and Cathay Pacific Airlines that will provide a monthly return of greater than 0.8% with the lowest level of risk. There should be a minimum weighting of 10% for each stock. h. (5 marks) Plot a scatter diagram showing the portfolios from parts (e), (f) and (g), with the X-axis displaying standard deviation and the Y-axis displaying monthly returns. i. (4 marks) If the monthly risk-free rate is 0.12%, estimate the Sharpe ratio for the portfolios mentioned in parts (e), (f) and (g) and highlight the highest Sharpe ratio using conditional formatting.
How do you do parts E i?
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