Investment Analysis

Bus329 (Bombardment Segregation)

Final exam article

September trimester 2020

Final exam article instructions:

  • This exam article contains 5 descriptive/conceptual and numerical scrutinys of resembling impressions. Full scrutinys must be retorted.
  • Control numerical/calculation-based scrutinys, you must profession full requisite/applicable workings. A sole retort accomplish referable be vericonsultation extraneously these workings.
  • You accomplish demand to stamp on the exam article. Past it is a Choose-Home experiment, content referablee that your finishedd exam article accomplish rafter Urkund control plagiarism.
  • This is an known quantity exam. You accomplish be fond 14 hours era to download the exam article, finished the exam and upload the exam article with retorts among this 14-hour window.
  • The exam article with retorts must be uploaded in order controlmat.
  • Total impression is 50.

Name:

Student ID:

[1(a)] Evaluate the informational and decrease timing roles of financial impressionet with relation to the fantastic-fangled COVID19 pandemic. (6 impressions)

Stamp your retort here:

[1(b)] “The successes or failures of the financial effects we lapse stop on the accomplishment of the underlying vericonsultation asset” – expound this declaration with specimen. (4 impressions)

Stamp your retort here:

[2] Mr. Tom is a lavish unwilling investor. Before the COVID19 pandemic (i.e., pre-COVID19 continuance) his lavish abhorrence coefficient was 2 and his optimal bombardments in a lavishy portfolio and lavish-free asset were AU$60,000 and AU$ 40,000 respectively. Exemplar hiatus of his finished portfolio was 21% and lavish-free reprimand was 5%.

During the COVID19 pandemic Mr. Tom becomes further lavish unwilling and his lavish-abhorrence coefficient increases to 4. Lavish-free reprimand drops to 3% and yield on lavishy portfolio increases by 2% (i.e., if the pre-COVID19 continuance yield on lavishy portfolio is X%, yield on lavishy portfolio during the COVID19 occasion becomes X% + 2%) and exemplar hiatus of lavishy portfolio rises to 45%. Based on these postulates, abright the aftercited control Mr. Tom:

(a) Optimal bombardment mutuality during COVID19 occasion continuance in lavishy portfolio

(b) Exemplar hiatus of finished portfolio during COVID19 occasion

(c) Expected yield of finished portfolio during COVID19 occasion

(d) Comment on the changes in Mr. Tom’s bombardment mutualitys in lavishy portfolio and lavish-free asset betwixt pre-COVID19 and during COVID19 continuances.

(You must profession full workings)

(10 impressions)

Stamp your retort here:

[3(a)] Mr. Anderson invested AU$200,000 in accumulation impressionet in December 2019. He lapsed 5,000 divides of ABC Company at AU$40 per divide. Expected reprimand of yield on ABC accumulation and S&P/ASX300 were 14% and 12% respectively at the era of lapse. The reprimand on T-bill issued by Reserve Bank of Australia (RBA) was 4% in December 2019.

Mr. Andrew, neighbour of Mr. Anderson, claims that he is smarter than Mr. Anderson in accumulation impressionet trading. He so invested AUD$200,000 in the divides of XYZ Company, which had an expected reprimand of yield of 16%. Twain Mr. Anderson and Mr. Andrew like the similar lavish-free reprimand and impressionet yield (yield on S&P/ASX300). Right CAPM to retort this scrutiny (presume twain divides are fairly figured).

  • Who invested in the lavishier divide? Extraneously any anticipation expound your retort in orders. (2 impressions)
  • Now expound your retort in (a) overhead with numerical anticipation (you must profession full applicable workings) (3 impressions)

Stamp your retort here:

[3(b)] COVID19 pandemic has telling impression on accumulation impressionet. Some accumulations experiment telling refright in figures, opportunity figures of some accumulations profession upward momentum. Investors are unintermittently care their eyes on accumulation impressionet to ascertain mis-priced accumulations. One of your neighbours is fantastic in accumulation trading and has inadequate recognition in financial segregation. He knows that you are studying bombardment segregation part. So, he approached you with the aftercited postulates and seeks your succor to establish bombardment decisions.

StockActual yield (%)BetaBargain lavish prize and lavish-free reprimands are 6% and 4% respectively. [i] Which exemplar accomplish you right control your segregation and why? (1 impression) [ii] What accomplish be your recommendations concerning these impure accumulations? You must profession full applicable numerical anticipations control each accumulation you demand to establish your recommendations (4 impressions)
A111.20
B91.10
C131.25
D120.90

Stamp your retort here:

[4(a)] Mr. X invested in a portfolio of lavish-free asset and a lavishy portfolio. Mr. X’s finished portfolio consists of 40% bombardment in lavish-free asset and 60% bombardment in lavishy portfolio. Mr. Y invests 100% in the similar lavishy portfolio. Expected yield on Mr. Y’s lavishy portfolio is 15%. Presume twain Mr. X and Mr. Y are on the similar Chief Fullocation Line (CAL). If the lavish-free reprimand is 5%, what is the expected yield on Mr. X’s finished portfolio? (4 impressions)

Stamp your retort here:

[4(b)] If the exemplar hiatus of the lavishy portfolio is 20%, numerically confirm that twain Mr. X and Mr. Y are on the similar CAL (3 impressions)

Stamp your retort here:

[4(c)] Now presume that bombardments in lavishy portfolio as implied in [4(a)] overhead are optimal control twain Mr. X and Mr. Y. It is indubiconsultation that Mr. X is further lavish unwilling than Mr. Y, past Mr. Y invests 100% of his store in lavishy portfolio, opportunity Mr. X invests solely 60%. Numerically trace a prize to confirm that Mr. Y is hither lavish unwilling than Mr. X. You must profession full applicable anticipations (3 impressions).

Stamp your retort here:

[5(a)] A impure-month cfull non-interference with $60 smite figure is currently selling at $5. The underlying accumulation figure is $59. The lavish-free reprimand is 12% p.a. The set-down with similar manliness and smite figure is selling at $3.5. Can an arbitrageur establish lavishhither avail? If ‘YES’ what strategies an arbitrageur should choose to establish this avail? Profession your anticipation to living your retort (4 impressions)

Stamp your retort here:

[5(b)] If your retort to 5(a) overhead is ‘YES’, rate the arbitrage avail by completing the aftercited consultation professioning management (i.e., whether buying or selling set-down/cfull portfolio); position, proximate coin glides and coin glides at expiry (i.e., in 4 months) (6 impressions)

Finished the aftercited consultation (you must profession requisite workings beneath the consultation)

StrategyPositionProximate coin glidesCoin glide in 4 months
ST < $60ST ≥ $60
     
    
     
    
Total   

[END OF EXAM PAPER]

FORMULA SHEET (BUS329)

  1. Effective annual reprimand:
  2. Annual percentage reprimand:
  3. Optimal chief fullocation to lavishy portfolio:
  1. Portfolio weights when mutuality betwixt brace lavishy effects (D & E) is -1: ;
  2. Portfolio yield in (twin-fellow weighted) sole refutation exemplar:
  1. Portfolio antagonism in sole refutation exemplar:
  2. Chief Asset Pricing Exemplar (CAPM):  
  3. Portfolio beta:
  4. Total lavish in refutation exemplar:
  5. Coantagonism in refutation exemplar:
  6. Mutuality in refutation exemplar:  
  7. R-square in refutation exemplar:
  8. Abnormal yield =
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