Harry jones has invested onethird of his funds in share 1

Assignment Help Finance Basics

Reference no: EM13616002

Q1. Since 1 August 2005, Adam Smith's investment policy has been to lodge fixed (term) deposits at his local bank. The bank pays interest on the maturity date of the deposit. When a deposit matures, Smith's policy is to relodge the whole sum (principle & interest) immediately for further period. He chooses the term of each deposit according to his assessment of the interest rates available at that time. Smith's decisions to date are as follows:
Date Decision

1 August 2005 8 months deposit @ 9.15% pa

1 April 2006 6 months deposit @ 8.45% pa

1 October 2006 10 months deposit @ 8.16% pa
Calculate, as at 1 August 2007, the effective interest rate Smith has earned since he began this policy. (Assume that all months are of equal length). Briefly explain each step.

Q2 Harry Jones has invested one?third of his funds in Share 1 & two?thirds of his funds in Share 2. His assessment of each investment is as follows:

Item Share 1 Share 2
Expected return (%) 15.0 21.0
Standard deviation (%) 18.0 25.0
Correlation between the returns 0.5

(a) What are the expected return & the standard deviation of return on Harry's portfolio?

(b) Recalculate the expected return & the standard deviation where the correlation between the returns is 0 and 1.0, respectively.

Reference no: EM13616002

Questions Cloud

If you deposit 3500 today into an accoun earning an 11 : if you deposit 3500 today into an accoun earning an 11 percent annual rate of return what would your account be worth

Miller corporation has a premium bond making semiannual : miller corporation has a premium bond making semiannual payments. the bond pays a coupon of 12 percent has a ytm of 10

Lily estimates that her time to fall asleep each night is : lily estimates that her time to fall asleep each night is approximately exponentially distributed. it takes her an

You buy a zero coupon bond at the beginning of the year : you buy a zero coupon bond at the beginning of the year that has a face value of 1000 a ytm of 9 percent and 12 years

Harry jones has invested onethird of his funds in share 1 : q1. since 1 august 2005 adam smiths investment policy has been to lodge fixed term deposits at his local bank. the

The coefficient of static friction between the floor of a : the coefficient of static friction between the floor of a truck and a box resting on it is 0.30. the truck is traveling

A parallel-plate capacitor has plates with area 00105 m2 : a parallel-plate capacitor has plates with area 0.0105 m2 separated by 1.00 mm of teflon.a calculate the charge on the

Determine two ways in which knowing ones investment horizon : determine two ways in which knowing ones investment horizon can help with ones investment strategy. provide two

Suppose you know that a companys stock currently sells for : suppose you know that a companys stock currently sells for 59 per share and the required return of the stock is 11.

User Account

All Pages