.Use Solver to determine optimal risky portfolio. 6.Create hypothetical portfolios (commencing from Weight A=0 and weight B=100) 7.Calculate Expected return and Standard Deviation for all the above combinations

Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter6: Risk And Return
Section: Chapter Questions
Problem 1Q
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KINDLY ANSWER PART 5,6.and 7

 

 

Using the stock price data for any two companies provided below carry out the following tasks:

1.Compute, for each asset:

i.Total Returns

ii.Expected returns

iii.standard deviation

iv.Correlation Coefficient

2.Construct the variance-covariance matrix

3.Construct equally weighted portfolio and calculate Expected Return, Standard Deviation and Sharpe ratio.

4.Reconstruct equally weighted portfolio and calculate Expected Return, Standard Deviation and Sharpe ratio.

5.Use Solver to determine optimal risky portfolio.

6.Create hypothetical portfolios (commencing from Weight A=0 and weight B=100)

7.Calculate Expected return and Standard Deviation for all the above combinations

8.Graph the efficient frontier

9.Graph the optimal portfolio

10.Assuming that the investors prefers lower level of risk than what a portfolio of risky assets offer, introduce a risk free asset in the portfolio with a return of 3%

11.Using hypothetical weights (A= Portfolio of Risky Assets, B= 1 Risk Free Asset) calculate portfolio Expected Return and Standard Deviation

12.Graph the risk and returns - Capital Allocation Line.

Year FIL FMF

2000$0.65$0.29

2001$0.70$0.31

2002$0.71$0.29

2003$0.76$0.30

2004$0.85$0.56

2005$0.80$0.97

2006$0.70$0.96

2007$0.60$0.80

2008$0.67$0.85

2009$0.67$0.69

2010$0.65$0.40

2011$0.50$0.50

2012$0.53$0.40

2013$0.57$0.44

2014$0.63$0.63

2015$0.72$0.75

2016$0.72$0.80

2017$1.16$1.15

2018$1.55$2.10

2019$2.45$2.12

2020$5.80$2.11

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