You have recently inherited some money from a wealthy uncle. Part of the condition of the… 1 answer below »
You have recently inherited some money from a wealthy uncle. Part of the condition of the
inheritance requires that you invest this money wisely so that you have money to live on in
your old age. Luckily, you have been studying corporate finance and have acquired some skills
to help with your investment. Your uncles ‘Will’ didn’t stipulate how you should invest this
money. However, as part of the requirements you must produce a report showing how you
intend to invest the money before you have access to it.
A friend has suggested five stocks that you should consider investing in. He has downloaded
for you the prices of these stocks for the last 2-3 years (this is in the data sheet).
Task:
(a) Conduct a brief analysis of the five companies (max 1500 words).
(b) Calculate the risk and return of all five companies as well as the market. In reporting
your findings annualise the average return and standard deviation.
a. Indicate the best and worst performing stocks.
(c) Calculate covariance/correlation of the stocks.
(d) Calculate the expected return and standard deviation of an equally waited portfolio
(investing 20% into each share)
(e) Your inheritance was $1million. How many shares would you invest in each of the 5
stocks (assuming the equally weighted portfolio – Price based on closing price on 30th
April)
(f) If you have an opportunity to invest in a market portfolio, how well did you portfolio
perform compared to the market portfolio?
(g) Using the closing price on 28th September, what is the value of your portfolio on this
date?
Attachments:
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