please include the explanation of the calculation
The file should have the answers to each question clearly written, and any supporting figures, tables (perhaps from excel), diagrams, or graphs. Your answers should briefly describe what you are doing (for example, if describing a calculation using the CAPM, you should write something along the lines of “I used the following equation [CAPM equation], where the risk-free rate is XX%, beta is YY, and the market risk premium is ZZ%”), and provide the answer (as in “using the previous equation I found the expected return of the stock to be WW%”). Note that the graders will not be looking at spreadsheets with formulas, they will be reading your explanations and will grade you based on what you state and whether the numbers look reasonable. Any figures, tables or graphs you use should be clearly labeled and clearly referenced in the text. A good answer buried somewhere in a table, without a reference, will probably not be considered a good answer. It’s extremely important that you submit a professional, organized document. As with the labels, if the grader cannot understand what you did in a particular question, you will receive a lower score. A few extra points: Questions focus on calculations early on, and then transition to “conceptual” questions. I suggest you solve the numerical parts first, and then take some time to reflect and answer the “conceptual” parts. The rubric for questions that require calculations is: o 100% Perfect answer o 80% Minor numerical mistake o 60% Logical mistake but generally right o 40% Multiple logical and/or numerical mistakes o 20% A beginning, but mostly wrong o 0% Nothing, or barely anything. Questions that ask for an explanation, an opinion, or a judgement can mostly be answered in three to five sentences or less. Long, rambling, answers are confusing and I will consider them as weakening the argument. The rubric for these questions is: o 100% Sound argumentation and logic o 80% Argumentation misses an important point o 60% Argumentation has basically sound ideas, but misses an important point and has important weaknesses, such as a contradiction (note shorter answers have less risk of contradicting themselves), or faulty logic. o 40% An argument starting developing, but didn’t get far. A developed argument contradicted the main ideas we discussed during the course. o 20% An attempt to answer was provided, but it was off point. o 0% Empty answer So here are the question : Alternative portfolio #4. This alternative portfolio should only be used by teams that stated they wanted to constraint the resulting portfolio’s volatility. Form an alternative portfolio by finding the risky portfolio (not including any riskless asset) that maximizes the Sharpe ratio. Then, combine the result with the risk-free asset so as to achieve your desired volatility level. That will be your alternative portfolio #4. a. Calculate the average daily return and standard deviation of your alternative portfolio#4 b. Calculate the beta and alpha of your alternative portfolio #4 c. Compare the performance of your team’s portfolio against the performance of your alternative portfolio #4. Which one performed better? Under what criteria? Are the differences statistically significant? (Note: the criteria vary depending on your team’s investment objective. If you were hedging oil, the answer is different than if you were maximizing returns.) d. Reflect on your results to part C. What did you learn from doing this exercise?