Compute the mean and standard deviation for the returns

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Financial Policy for Managers Assignment -

Analyze "The State of South Carolina" case. Specifically, you are required to answer the study questions below.

Questions -

Q1. Frame the issue. Briefly describe why South Carolina is planning to invest state pension money in the stock market.

2. Briefly discuss the pros and cons of investing in the stock market.

3. Compute the mean and standard deviation for the returns corresponding to each of the asset classes in Exhibit 1. Discuss the risk and return relation for stocks and bonds.

4. Calculate the mean monthly returns and standard deviations for each of the Dow 30 stocks (in Exhibit 2) over January 1990 to June 1998 period. Compare the mean return and standard deviation relation across the Dow 30 stocks versus the mean return and standard deviation relation across the various asset classes from Exhibit 1.

Note: To facilitate a meaningful comparison between Exhibit 2 and Exhibit 1, you may annualize the monthly return statistics by the following approximating convention: mean annual return ≈ 12*(mean monthly return) and standard deviation of annual return ≈ √12 *(standard deviation of monthly return)

5. Compute the mean return and the standard deviation of 2-stock portfolio consisting of Exxon and General Electric. Compare the portfolio standard deviation to the average standard deviation of the two stocks. Repeat the analysis for General Electric and General Motors.

6. Compute the mean return and the standard deviation of 5-stock portfolio (your pick of any 5 stocks) in the Dow 30. Compare the portfolio standard deviation to the average standard deviation of the five stocks.

7. Compute the mean return and the standard deviation of 10-stock portfolio (your pick of any 10 stocks) in the Dow 30. Compare the portfolio standard deviation to the average standard deviation of the ten stocks.

8. Compute the mean return and the standard deviation of 20-stock portfolio (your pick of any 20 stocks) in the Dow 30. Compare the portfolio standard deviation to the average standard deviation of the twenty stocks.

9. Discuss the relation between the number of firms in a portfolio and the standard deviation of the portfolio.

10. Compute average returns and standard deviations corresponding to country bond and stock data displayed in Exhibit 3. Compare and discuss the difference between stocks and bonds for the country data.

11. Compute the mean return and the standard deviation of 2-country stock portfolio consisting of Germany and The Netherlands. Compare the portfolio standard deviation to the average standard deviation of the two countries. Repeat the analysis for Germany and Japan.

12. In your opinion, what are three key learning points from this case?

Attachment:- Assignment Template.rar

Reference no: EM132219570

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1/20/2019 10:19:07 PM

Analyze “The State of South Carolina” case. Specifically, you are required to answer the study questions. You may work in groups of up to four people for this assignment. Your report should be typed and printed. Please submit only one report per group. Be prepared to present to your classmates the rationale of your answers, and to respond to questions. This assignment will be graded as: “Excellent (A)”, “High Satisfactory (A-)”, “Satisfactory (B)”, “Low Satisfactory (C)”, or “Unsatisfactory (D)”. Note: For simplicity, let’s assume “equally-weighted” when constructing portfolios throughout this assignment.

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