You are interested in investing in Australian shares and decide to investigate the shares of two Australian companies: Rio Tinto Group (RIO.AX) and Westpac Banking Corporation (WBC.AX). Below are the opening prices, closing prices for BHP and CBA for 2021-2022 and dividends paid by BHP and CBA during 2021-2022 financial year (1st July 2021 to 30th June 2022). Use the tables to add the required data and add to your submission. Click on this link http://au.finance.yahoo.com to access information on both BHP and CBA. Just add these stock codes to the search box at the top of the web page and do a historical data search. Remember to use opening and closing prices only. You can also find the dividend data in the same search. Make sure your closing prices from the previous month are equal to your opening price for the following month. Please be sure to use the first and last trading day of the month. You will need a daily search to make sure you get the right data.

a)Using the prices above calculate the standard deviation of the monthly holding period return for BHP and CBA for the period Jul 2021 Jun 2022. (Hint: For each share first calculate monthly holding period returns (%) for the period Jul 2021 Jun 2022 for BHP and CBA. The monthly holding period return is the percentage return (%) you would receive if you bought an asset on the first day of the month (opening price) and sold it on the last day of the month (closing price) and include any dividends paid in that month.)

b)Calculate annual holding period returns of BHP and CBA for the financial year 2022.

c)Calculate the covariance between BHP and CBA.

d)Calculate the correlation coefficient between BHP and CBA.

e)Now assume we have portfolio consisting of only BHP and CBA shares. Calculate the return and standard deviation of following portfolios: 80% of funds are invested in CBA and rest in BHP, 35% of funds are invested in CBA and rest in BHP, and 10% of funds are invested in CBA and rest in BHP. (Hint: Use annual holding period returns for calculation of portfolio returns)

f)Comparing the answers from parts a and e analyse the differences and evaluate why investing in a portfolio of assets is preferable for an investor. (Word limit 500 words)

Please note: For parts a and c you can use excel to calculate monthly holding period returns (%) and set out the tables for calculations of standard deviations of CBA and BHP, and covariance between CBA and BHP. If you use excel to construct the tables please copy and paste it in the word document and also submit the excel file in EASTS. You still have to show how the standard deviation, etc. was derived and this does not mean giving the Excel algorithm, which does not show how the solution was derived. For example using excel formula such as =COVAR() is not acceptable.