KING’S OWN INSTITUTE* Success in Higher Education FIN201 INVESTMENT MANAGEMENT T121 24/02/2021 16:10 PAGE 1 OF 17 *AUSTRALIAN INSTITUTE OF BUSINESS AND MANAGEMENT PTY LTD © ABN: XXXXXXXXXXCRICOS...

1 answer below »

View more »
Answered 11 days AfterMay 06, 2021FIN201

Answer To: KING’S OWN INSTITUTE* Success in Higher Education FIN201 INVESTMENT MANAGEMENT T121 24/02/2021 16:10...

Harshit answered on May 09 2021
148 Votes
QUESTION1.
1.
a.
i. The equal-weightedreturn
    Company
    Value as at 1.1 2020
    Value As at 31.12.2020
    Return
    Return
    Weight (equal)
    Weight * Return
    
    $
    $
    $
    %
    
    
    Breadth Ltd
    10,000
    12,500
    2,500
    20.0%
    0.25
    5.0%
    Depth Ltd
    20,000
    15,000
    -5,000
    -33.3%
    
0.25
    -8.3%
    Height Ltd
    30,000
    33,000
    3,000
    9.1%
    0.25
    2.3%
    Length Ltd
    40,000
    48,000
    8,000
    16.7%
    0.25
    4.2%
    Total
    1,00,000
    1,08,500
    8,500
     
    1
    3.1%
Therefore, Return based on “the equal-weighted” = 3.1%
ii. The Price-weighted return
    Company
    Value as at 1.1 2020
    Value As at 31.12.2020
    Return
    Return
    No of Share
    Price per unit as on 31.12.2020
    Weight based on price
    Weight * Return
    
    $
    $
    $
    %
     
    $
    
    
    Breadth Ltd
    10,000
    12,500
    2,500
    20.0%
     5,000
     2.50
     0.21
    4.13%
    Depth Ltd
    20,000
    15,000
    -5,000
    -33.3%
     10,000
     1.50
     0.12
    -4.13%
    Height Ltd
    30,000
    33,000
    3,000
    9.1%
     10,000
     3.30
     0.27
    2.48%
    Length Ltd
    40,000
    48,000
    8,000
    16.7%
     10,000
     4.80
     0.40
    6.61%
    Total
    1,00,000
    1,08,500
    8,500
     
     
     12.10
     1.00
    9.09%
Therefore, Return based on “the Price-weighted” = 9.09%
iii. The value -weighted return
    Company
    Value as at 1.1 2020
    Value As at 31.12.2020
    Return
    Return
    Weight (based on value as on 01.01.2020
    Weight * Return
    
    $
    $
    $
    %
    
    
    Breadth Ltd
    10,000
    12,500
    2,500
    20.0%
     0.09
    1.84%
    Depth Ltd
    20,000
    15,000
    -5,000
    -33.3%
     0.18
    -6.14%
    Height Ltd
    30,000
    33,000
    3,000
    9.1%
     0.28
    2.51%
    Length Ltd
    40,000
    48,000
    8,000
    16.7%
     0.37
    6.14%
    Total
    1,00,000
    1,08,500
    8,500
     
     1.00
    4.36%
Therefore, Return based on “the Price-weighted” = 9.09%
b. The value-weighted return is providing more accurate calculation compare to Equal-weighted and Price-Weighted as it calculates return of the portfolio based on the amount actually invested or value of portfolio at the beginning of the period. Equal-weighted does not justify the calculation as gives equal importance to each share irrespective of value on the opening date. (Fernholz, R.T. and Fernholz, R., 2020) Price-Weighted also ignores the amount invested gives more importance to shares that have more price, it may be possible that a share price may be very high as compared to other shares un the portfolio. Therefore, Value-Weighted is most accurate calculation to find return of the portfolio comprising of different shares. (Jiang, H., Vayanos, D. and Zheng, L., 2020)
Question-2
2.
a. Given,
Risk Premium     (Rf)        =10%
Standard Deviation         =14%
Risk free...
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here
April
January
February
March
April
May
June
July
August
September
October
November
December
2025
2025
2026
2027
SunMonTueWedThuFriSat
30
31
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
2
3
00:00
00:30
01:00
01:30
02:00
02:30
03:00
03:30
04:00
04:30
05:00
05:30
06:00
06:30
07:00
07:30
08:00
08:30
09:00
09:30
10:00
10:30
11:00
11:30
12:00
12:30
13:00
13:30
14:00
14:30
15:00
15:30
16:00
16:30
17:00
17:30
18:00
18:30
19:00
19:30
20:00
20:30
21:00
21:30
22:00
22:30
23:00
23:30