wa + wb + wc = 1. E(rp) = waE(ra) + wbE(rb) + wcE(rc ) 0.6(-0.2) + 0.3(0.1) + 0.1(0.04) = -0.086 Hence the strategy before the 2007 economic crisis would have realised an expected return of -8.6% on investment. The strategy adopted from 2007 onwards in the light of the crisis would realise: E(rp) = waE(ra) + wbE(rb) + wcE(rc ) 0.4(-0.2) + 0.4(0.1) + 0.2 (0.04) = -0.032 The strategy adopted after 2007 would realise an expected return of -3.2% on investment. As a result, the benefit of the strategy adopted from 2007 would be a reduced lose of 5.4% II. Advisability of investing more funds in UK equities. With the managers of the funds thinking of investing more funds into equity in the market, it is important for the managers to analyse the UK equities in a risk-return relationship. Hence when analysing the risk premium of the equity with the rest of the asset class, the return differential will be attributed to the difference in the risk associated with equity as opposed to bonds. The equity line will be normally "shakier" than the bond line. As evident from the data provided, Wealth invested in equity for the past 20 years has been more volatile than wealth invested in bonds (the UK equity having a risk of 16% as compared to 5% for bonds and cash for 0.3% in derivatives). Despite the higher return, the risks were higher as well. The fund’s managers should care about the riskiness of any investment especially in a volatile market. As a result, they should also be willing to trade a lower rate of investment return for "insurance" that their principal will be secure. This is called risk-aversion -- and all things being equal, most investors would prefer less risk to more. At the same time, when analysing the Standard Deviation as a measure of risk, the UK equity returns are riskier and more volatile. Even with the future projections of 8% returns per annum, the projected risk is projected to be at 18% for UK equity and 19% for overseas equity respectively and at the same time, their correlation is very high at 0.8% between the UK and overseas equity making diversification not an option since it will not create any positive benefits of diversification. Due to the fact that the fund’s managers will be holding different portfolios, it would be important for them to use other statistical and non statistical data to be able to make informed decisions like the beta in respect to the market, fundamental ratios such as Book to Market Ratio and Earnings Price Ratio. III. Advantage of investing in the funds in international equities rather than UK equities. Due to the fact that stock market investing is risky, in the wake of the financial crisis, it is recommended for the fund’s managers to hold a well-diversified portfolio (including international diversification) to reduce risk as supported by the Capital Asset Pricing Model (CAPM) and the Modern Portfolio Theory (MPT). The fund’s manager, after analysing international market correlations in relation to the returns of various national markets due to difference in levels of economic growth and timings of business cycles, would allocate investments among these markets as a means of rebalancing their portfolios and reducing risks in favor of foreign equities (Rezayat and Yavas 440-458). In analysing the data provided, international equity portfolio diversification would be recommended based on the existence of low correlations among national stock markets and
The market capitalization was 30 million pounds As given, the return on the three-asset portfolio that consists of equities, bonds and cash are given below as follows; Instrument Upto 2007 2007-now Equities 60% 40% Bonds 30% 40% Cash (treasuries) 10% 20% Where: a=equity b=bonds c = cash (treasuries) I…
The study of Hatch & Schultz (2007) focuses on a critical issue: the aspects of the relationship between culture, identity and image. The above researchers tried to check whether the above relationship is close or whether the above three organizational aspects tend to interact periodically, under circumstances.
Redbox is an American company that has its scope of business in the rental of DVDs, Blu-Ray Discs, and also video games using fully automated retail kiosks. Redbox possessed over 33,000 kiosks in over 27,800 locations. Redbox, as a subsidiary of Coinstar Inc., constituted 34.5% market share of discs rented, as of the second quarter 2011.
From an analysis of the market behavior for both Coke and Pepsi Co, it is evident that the annual expected return for Coke is higher than the annual expected return for Pepsi Company, which indicates that Coke is a better investment option that Pepsi Company.
Methodology 6.1. How you constructed Table 7. Source of Data 7.1. Data manipulation 7.2 Graphs 7.3. Description of the graphs 7.4. Time Table 8. Event Description 8.1. Ten Key Events in the company 8.2. Five key events related to the related commodity 8.3.
It is generally known that for a financial asset a positive relationship between the risk and the return strongly holds. This kind of positive relationship simple implies that if an investor takes more risk, then he would definitely expect a higher return, or in
As per Coinstar Inc.’s Annual Report for the year 2010, the company increased its ownership proportion of Redbox from 51% to 100%.
a. General Economic Influence: At a time when a sluggish and struggling economy
Social and environmental accounting is a contemporary component of accounting principles and standards. It goes beyond the formal record keeping and financial reporting to encompass internal and external information demands by accounting stakeholders in the economies.
Secondly, English being my second language made it even a little bit harder since every course work was written and translated in English. Despite that, I have gotten used to the food and secondly, my classmates have helped me a lot with my reading
rtfolio construction, the individual risk and return features of the fundamental investments should be considered alongside one’s unique requirements, goals as well as risk considerations. Consequently, this paper seeks to dissect the portfolio construction process, offering
2 pages (500 words)Term Paper
Hire a pro to write a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Apply my DISCOUNT
Got a tricky question? Receive an answer from students like you!Try us!
Let us find you an essay for FREE
Contact us via Live Chat, call us at +16312120006or send an email to firstname.lastname@example.org