Question

Pick any company and make a portfolio for them

Portfolio Hi Class, Here you will be creating portfolio in the following ways. • First part includes, finding out portfolio return and risk with you choice on proportion/fraction to invest in each asset. Hint: you can use Wi*Ri equation to find portfolio return. If you find portfolio risk, that would be great and will invite bonus of 10 additional marks. If you cannot find portfolio risk, there is no penalty. • Secondly, you will be calculating portfolio beta using the fraction and assets you have selected. Which kind of risk it is? Give your comment/s on the riskiness of the portfolio.

Answer 1

Suppose there is 2 investment class Stock & Debt.

We invest in 75% stock & 25%debt.

Wi= weight for investment class

Ri= return.

Now if annual return in stock is 20% & Debt is 22% then what will be overall portfolio return.

Pr = portfolio return = Wi stock * Ri stock + Wi debt *Ri debt

0.75*0.20 + 0.25*0.22

0.15+0.055

=0.205 i.e. 20.5% return on portfolio.