One year ago, you bought shares in each of 3 companies, P Ltd, Q Ltd and R Ltd. The number of shares bought and the purchase price of each share is shown in columns (2) and (3) of the table below, and...

Please circle the correct answer
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T217 Assignment No. 1 – FIN702 - Investment and Portfolio Management, Due 16 August,2017
KING’S OWN INSTITUTE

FIN702 – ASSIGNMENT 1

TRIMESTER 2, 2017

STUDENT NAME & ID___________________________________________________
TUTORIAL DAY & TIME: WEDNESDAY, 3 pm – 5 pm TUTOR: Dr M FIEDLER
SUBJECT NAME:PG – Investment and Portfolio Management
SUBJECT NUMBER:FIN702
VALUE: 20% of the Total marks – your performance in this Assignment will form
part of your marks for the overall subject,
This Assignment is to be completed by students individually and is required to be submitted to
the Tutor by 3.00 pm, Tuesday, 15 August, 2017, together with a KOI Cover Sheet.
Because the Assignment is predominantly calculation work, it will not need to be submitted
through TURNITIN to assess suspected plagiarism.
That said, while it is encouraged that students interact and consult with their peers, including
discussion over this Assignment, students will recognise that this is part of a competitive effort,
and accordingly, each student – after any consultation with other students– should complete
each of the questions by themselves. They should also read the declaration on the KOI
Assignment Cover Sheet, to ensure their integrity is maintained before signing the Sheet. If in
doubt, or if you have any questions, please refer to me.
Answers should be shown in the spaces provided hereunder.
With best wishes for completing a successful Assignment.
Dr Mervyn Fiedler
Subject Co-ordinator – FIN702.
29 July, 2017
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T217 Assignment No. 1 – FIN702 - Investment and Portfolio Management, Due 16 August,2017
ASSIGNMENT 1 – QUESTIONS
There are five (5) questions in this Assignment.
Marks allocated to each section of the question are shown alongside each question
number.
Answer each part of each question on the question sheet, in the space provided. Show all
workings for every question. Two sheets for additional workings are attached to this
assignment – if more are required please print additional work sheets.
1) (1 + 1 + 1 + 1 = 4 Marks)
One year ago, you bought shares in each of 3 companies, P Ltd, Q Ltd and R Ltd. The
number of shares bought and the purchase price of each share is shown in columns (2)
and (3) of the table below, and comprises your investment portfolio. Today, the price of
each share is as shown in column (4) of the table.

Name of Company Number of Shares Purchase PriceShare Price after One Year
(1) (2) (3) (4)
P Ltd 3,000 $10.00 $10.80
Q Ltd 5,000 $3.0 $3.60
R Ltd 6,000 $5.00 $5.30
(a) Calculate the equally weighted portfolio return for the year. [Express your
answer as a percentage return, correct to 2 decimal places.]
Solution
Name of Company Annual return
P Ltd (10.80 – 10) / 10 = 8%
Q Ltd (3.60 – 3.0) / 10 = 6%
R Ltd (5.30 – 5.0) / 10 = 3%
Equally weighted portfolio return = 8*0.33 + 6*0.33 + 3*0.33
= 5.61%
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T217 Assignment No. 1 – FIN702 - Investment and Portfolio Management, Due 16 August,2017
(b) Calculate the price-weighted portfolio return for the year. [Express your
answer as a percentage return, correct to 2 decimal places.]
Solution
Name of Company Price per share Price weight
P Ltd 10 10 / 18 = 0.55
Q Ltd 3 3 / 18 = 0.17
R Ltd 5 5 / 18 = 0.28
Price weighted portfolio return = 0.55*8 + 0.17*6 + 0.28*3
= 6.26%
(c) Calculate the value-weighted portfolio return for the year. [Express your
answer as a percentage return, correct to 2 decimal places.]
Solution

Name of Company Number of Shares Purchase Price Share Value of shares Value weight
P Ltd 3,000 $10.00 $30,000 30,000 / 75,000 = 0.40
Q Ltd 5,000 $3.0 $15,000 15,000 / 75,000 = 0.20
R Ltd 6,000 $5.00 $30,000 30,000 / 75,000 = 0.40
Value weighted return on portfolio = 0.40*8 + 0.20*6 + 0.40*3
= 5.60%
(d) Compare your answers in parts (a), (b) and (c). Which method of calculating
returns do you prefer? Why?
Solution
The value weighted return on portfolio is the best way to find the overall return on portfolio. It
is due to the reason that value reflects the total investment made in individual security and
therefore, the return on portfolio reflects the true return according to the investment made in
each security.
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T217 Assignment No. 1 – FIN702 -...