Investment Portfoli

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Student Name: LEE TAE JEONG

Student #: 7573103

Assignment Reference #: IPM/Jul11/1, Investment and Portfolio Management

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Investment and Portfolio Management Assignment 1 ******************************************************************************

A table of Contents

Q1. Portfolio Management

Q-a: What’s the least risky combination of these assets?

Q-b: How much James should invest in the portfolio (comprising of security A, B) and risk free asset (RFR)

with 9% of return provided ?

Q2: Analysis of the article of Wall street journal

a) Why did Merck’s price fall so significantly and which important finance theory the case relates to and

why?

b) Should the CEO have withheld this information against concerns of having negative effects on share

price and obligation to maximize the value of these shares?

c) What has happened to Merck’s share price since the episode? How would I have reacted to this event as a shareholder?

Q3 : What’s the price of T-bill with a face value of 1,000,000 with 46 days to maturity at a discount rate of

6.75%?

Q4: Analysis of my portfolio

a) What’s the yield to maturity (YTM) for the T Bill?

b) What’s the Duration of each securities?

c) Recommendation of the composition of portfolio for investment horizon of 3 years.

d) How much would need to be invested in each instrument to obtain a portfolio duration of 3.25 years

e) Is default risk a major concern for this portfolio?

f) New value of the portfolio when yield to maturity and coupon rate changes.

Table

Table-1 : Duration of corporate bond rated Aaa

Table-2: Calculation of weights for each instrument

Graph (Appendix)

Graph-1 : CML and Efficient Frontier

Reference

Q1. Portfolio Management

Assumption: Investors want to maximize the returns from the total set of investments for a given level of...