Reference no: EM133127917

Background

The City State of Newdovia, nestled in the Harz Mountains is famous for its beautiful chocolate box buildings and even more famous for its delicious chocolates and cakes. At the latter part of 2019 a stock exchange was established to raise capital and bolster the city's 'booming' economy'.

Currently only 6 companies are listed but it is envisaged this will increase over time.

There is also a government-sponsored bond available which offers an annual yield of 1%.

You are required to provide a short business sryle report to a group of investors in which you detail your analysis of the data provided and make recommendations as to how they should invest. Your results should be presented neatly, with full explanation as to how you arrived at your conclusions.

You will need to deterrnine an index from the weighted average (by rnarket capitalisation) of the returns of individual shares.

Note: Any figures included in your report should be of a standard suitable for use in a business presentation. Additionally, you should ensure your report is legible and well presented. It should not be necessary for your report to be more than 6 pages in length (excluding any appendices). The mark scheme below includes marks for presentation/professionalism.

Your report should include:
• An abstract (one paragraph)
• A short introduction
• The main body detailing your analysis
• A section summarising your analysis and making recommendations

Part 1

The investors are interested in buying a portfolio consisting only of shares in a particular sector of this emerging market. You are required to include the following in your report.

1. A plot of the share closing prices and your index close over the last year.

2. An optimal minimum risk portfolio consisting of only tourism shares.

3. A plot of the efficient frontier for a tourism portfolio showing your minimum risk portfolio.

4. A maximum return/risk portfolio consisting of only cake makers/chocolatier shares but including a riskless return.

5. A plot of the efficient frontier, the capital allocation line and your portfolio in the risk/return space.

6. Briefly discuss the merits/drawbacks of each portfolio and make recommendations as to which sector should be invested in (if any). Should either portfolio be considered as a viable investment?

You may use the standard deviation to obtain estimates of any risk for the shares.

Part 2

The investors are considering setting up a portfolio weighted according to the market capitalisation of each share. You must determine the following:

1. A plot of the returns of each of the shares and the returns of the index.

2. The expected portfolio return.

3. Briefly comment on such a portfolio and whether this is (in your opinion) a sound investrnent. Could you make a recommendation as to a better portfolio?

Attachment:- data.rar