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5 Feb
2020

Calculating The Returns of Portfolio AssignmentTutorOnline | Good Grade Guarantee!

Analysts are pondering on the future Australian economy because of its potential impact on their portfolios. The managers of your team at the corporateion you are working for notes that risk free rate of return in Australia has reached a record low of 1.28% and the expected return of the share market index is 6.49%. the executive team wants to know whether any of these 3 companies represents an attractive investment. the current return data and their betas are given in Table 1:
AssignmentTutorOnline
Company Beta Actual ReturnFlight Centre 0.80 7.00%Gooroo Ventures 1.00 7.50%ANZ Bank 1.20 7.23%The team will he seeking your opinion on weather to buy a stock,so you will need to be able determine when a stock overvalued or undervalued. as well as understand what is meant by beta of a stock.In addition to identifying stocks that will generate value,you will be expected to understand the concepts of risk and returns, Remember that the weight of stocks in a portfolio could be varied .Remember that ,the risk of a portfolio of two stocks with equal weights will be diffrent from the risk of a portfolio with unequal weights and the same is applicable on returns, The case of calculating the returns of a portfolio is different from calculating the risk of the same portfolio because of the effects of the variances and co variances . In the variance-co variance matrix below,you have been given three stocks, Flight Center, Gooroo Ventures and ANZ Bank. The variances are across the diagonals. Note: that the square root of variance is standard deviation. In this case , The standard deviation of flight center is the square root of 0.2511 = 0.5010. the co variances are 0.7523 (Flight center and Gooroo Ventures)
Supervisor’s Advice:
Your supervisor has notified you that the team leader is likely to ask you about the retuns of the three stck portfolio. However he is not sure whether he will assume equal weights or not. He has also asked about the risk of each pair of stocks if they were equally weighted. As you know , Portland has $150

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