Question
The share price and dividend history in pence for IMW are as follows. Dividends are paid on 31 December in each year Year 1 January
The share price and dividend history in pence for IMW are as follows. Dividends are paid on 31 December in each year
Year 1 January Price Dividend
2015 240 10
2016 260 10
2017 240 12
2018 280 15
2019 295 20
What are the arithmetic and geometric average time-weighted rates of return for the investor?
(b) The table below shows the expected return and risk (standard deviation) for eight shares.
|
| Expected Return |
Risk |
| Share A | 12% | 8% |
| Share B | 6% | 4% |
| Share C | 16% | 12% |
| Share D | 12% | 12% |
| Share E | 7% | 10% |
| Share F | 17% | 15% |
| Share G | 6% | 5% |
| Share H | 15% | 15% |
(i) Use the concept of Efficient Frontier to identify four shares that you would select for the optimal portfolio. Explain why you have chosen each one and why the remaining shares were excluded. Draw the efficient frontier portfolio on a suitable diagram.
(ii) Calculate the Sharpe ratio for each of the eight shares with a 2% risk-free rate and identify the highest and lowest value.
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Passive Income Ideas How To Make Money Quickly And Easily Right Now
Authors: Maggie B. Berry
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