Cuaderno 5 Portfolio Managament

Cuaderno 5. Segunda parte

Portfolio Managament

Instructions: Do the following calculations based on the information given.

Exercise 2

Suppose you invested $1'400 in a stock with a share price of $35. After one year, the stock price per share is $49 and for each share you received a $1.40 dividend.

– What was your total dollar return?

– What was your total percent return?

Exercise 2

– The percentage return for a 6 months investment in the Security A was 8.80%.

– Meanwhile, an investment in the Security B paid 4% in 3 months.

– Which of the two investments would you prefer if you want to invest for a whole year?

Exercise 3

Take the price quotations of the last six months for AMXL.MX and HOMEX.MX, provide them in an Excel file, calculate the continuous daily returns for both companies, as well as their expected return.

Exercise 4

For the previous exercise implying AMXL.MX and HOMEX.MX, calculate the total risk of both stocks and their annual risk premium if the annual risk free rate is 4%. Take into consideration that the standard deviation of those returns is the daily total risk of the security, which has to be annualized in order to obtain the annual risk premium.

Where:

N = Number of returns

Exercise 5

For the previous exercise with the returns of AMXL.MX and HOMEX.MX calculate the portfolio’s expected return and total risk, if the weight of AMXL.MX in the portfolio is 70%. What is the correlation of both stocks and what does it mean?

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