BUS329: Investment Analysis - Accounting And Finance Assignment Help

Assignment Task

Q1: An investor purchased 100 shares of ABC company at $80 per share. He borrowed $4000 from the broker for this investment. If the maintenance margin is 35%, how far can the stock price fall before the investor receives a margin call?

Q2: You sell short 150 shares of ABC company at $40 each.

(a) How much cash (or security) you must pay if the initial margin is 60%

(b) At what share price will you receive margin call if maintenance margin is 40%?

Q3: An open-end fund has a net asset value of $14.50 per share and the fund is sold with a front-end load of 5.5%. What is the offering price?

Q4: Risk aversion coefficient of Mr. Money is 3. He wants to maximize his utility by investing in a risky portfolio and in a risk-free asset. The risky portfolio has expected return of 12% and standard deviation of 18%, while return on risk-free asset is 5%.

1. What investment proportions in risky portfolio and risk-free asset will maximize Mr. Money’s utility? What is his utility maximizing return?
2. Suppose the optimal risky portfolio consists of stock A and stock B in the proportion of 40% and 60%. Compute the optimal investment proportion in each risky asset and risk-free asset.

Q5: From the following variance-covariance matrix, calculate (j) the expected return of the minimum variance portfolio and (ii) correlation between the returns of bond and equity. Assume expected return of bond and equity are 9% and 12% respectively.

Q6: Index model for the excess return of stock XYZ is estimated with the following output:

What proportion of variation in XYZ excess return is explained by variation in the market excess return?

Q7: Covariances of stock A, B and C with the market are 153, 257 and 236 respectively. Risk-free rate is 4%. Variance and expected return of market portfolio are 230 and 22.4% respectively. Calculate the expected returns of stock A, B and C given by CAPM.

Q8. An index model for Gold and Copper Ltd. is estimated using monthly data with the following result:

The company announces its profit in December 2017. Return on the firm’s share in January, 2017 was 8% and return on market index was 2%. Calculate abnormal return.

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