Reference no: EM132876503 , Length: word count:1000
Investment Portfolio Containing Investments in 5 Australia Companies
(a) Using the Solver function in Microsoft Excel, determine the optimal weights for each stock in your portfolio across an appropriate set of monthly expected returns and graph
(i) the unrestricted efficient frontier.
(ii) the restricted efficient frontier.
(b) Explain the sense in which your frontiers can be described as 'efficient", and the difference (if any) between your restricted and unrestricted efficient frontiers. Which is the more efficient?
(c) Suppose you are able to borrow or lend limitless amounts at a certain rate of interest. Illustrate and explain the implications for the efficient frontier, and also for portfolio selection decisions where investors have the same information but differing degrees of risk aversion. No calculations are necessary for this section.
(d) Suppose the rate of interest on borrowing is higher than the rate of interest at which you can lend. Illustrate and explain the implications for the efficient frontier, and also for portfolio selection decisions where investors have the same information but differing degrees of risk aversion. No calculations are necessary for this section.
(e) With reference to your research
(i) Suggest one additional way in which your frontiers could be made more efficient.
(ii) Identify one key limitation of your analysis.
You are required to construct an investment portfolio containing investments in 5 Australian companies, chosen from stocks listed in the S&P/ASX 200. Moreover, you are required to graph two estimated efficient frontiers for your portfolio.
To complete your graphs, you are required to determine estimated expected returns, standard deviations and correlations of the 5 stocks in your portfolio. In order to complete this task, you should download the ASX 200 components file: ASX200 components .xls I and select 5 stocks from the list, with a view to building a reasonably well-diversified portfolio.
When you search fort certain stock, make sure to use the code and add "AX" at the end as some stocks are cross-listing on multiple exchanges internationally. (For example, to find Newcrest Mining Ltd shares, search "NCM.AX"). For each company, go to 'Historical Data and obtain monthly data covering the most recent 24 months up to and including the end of February 2021 (February 28 2020 data). Your first adj. closing price will be February 28, 2019.
Attachment:- ASX200 components .rar
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