# Essay about Fin350 Week 7 Module 7 Practice Problems

1409 Words Mar 16th, 2016 6 Pages
1. Do all work in Excel. Do not submit Word files or *.pdf files.
2. Submit a single spreadsheet file for this assignment. Do not submit multiple files.
3. Place each problem on a separate spreadsheet tab.
P8–9 Rate of return, standard deviation, and coefficient of variation Mike is searching

for a stock to include in his current stock portfolio. He is interested in Hi-Tech,
Inc.; he
Expected return
Year Asset F Asset G Asset H
2016 16% 17% 14%
2017 17 16 15
2018 18 15 16
2019 19 14 17
Alternative Investment
1 100% of asset F
2 50% of asset F and 50% of asset G
3 50% of asset F and 50% of asset H
Asset
Expected return, r
Risk (standard deviation), sr
V 8% 5%
W 13 10

Using these assets, you have isolated the three investment alternatives shown in the

following table.
a. Calculate the expected return over the 4-year period for each of the three alternatives. b. Calculate the standard deviation of returns over the 4-year period for each of the three alternatives.
c. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.
d. On the basis of your findings, which of the three investment alternatives do you recommend? Why?

P8–27 Portfolio return and beta Jamie Peters invested \$100,000 to set up the following

portfolio 1 year ago.
Asset Cost Beta at purchase Yearly income Value today
A \$20,000 0.80 \$1,600 \$20,000
B 35,000 0.95 1,400 36,000
C 30,000 1.50 — 34,500
D 15,000 1.25 375 16,500

a. Calculate the portfolio beta on the basis of the original cost figures.
b. Calculate the percentage return of each asset in the portfolio for the year.
c. Calculate the percentage return of the portfolio on the basis of original cost, using income and gains during the year.
d. At the time Jamie made his investments, investors were estimating

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