Afw2561

BFW3121 – Investments and Portfolio Management

Assignment II

Due: October 12, 2015 (Monday) 5:00 PM

With the same 10 (TEN) companies you have selected, perform the following (briefly

comment on your results in addition to simply reporting them):

(a)

(b)

Compute the average return and volatility for each of the 10 stocks and the

two market portfolios.

Plot the risk-return efficient frontier using the ten stocks you have chosen.

(c)

In the graph in part (a) above, show the point representing the risk-return on

individual stock and the two stock market indices (the Value-Weighted Return

and Return on S&P 500 Composite Index).

(d)

Compute the return and risk on an investment strategy where you invest $100

million in the best performing stock, out of 10 stocks, on monthly basis. Also

report your ending wealth in five years. This is a perfect foresight model. At the

beginning of month, you assume that you know the best performing stocks in

the next month and invest in it. But every month, the best may change.

You need to present a report with the above required information.

Note:

1.

This is a group project. A group should consist minimum of 3 students and

maximum of 5 students. The group member can be from different tutorial

groups and different tutors.

2.

You should submit one report per group. The names of the students in the group

should appear in the cover page of the report.

3.

You should submit only soft copies of your report (in PDF or Word format) and

the excel file with your computations.

4.

Further details would be provided during the course of the semester. A

template for Excel file will be posted soon.

5.

Note that some tips on how to write the report and how to draw the frontier

will be posted on Moodle.