Managing Finance: Risk and Return Analysis of ANZ Bank
Added on 2023-06-13
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Running Head: Managing finance
1
Project Report: Managing Finance
1
Project Report: Managing Finance
Managing finance
2
Contents
Introduction.......................................................................................................................3
Que 1: calculation of returns.............................................................................................3
Que 2: calculation of total risk..........................................................................................4
Que 3: calculation of systematic risk................................................................................4
Que 4: Calculation of unsystematic risk...........................................................................4
Que 5: Suggestion.............................................................................................................4
a) Basis for selection of a stock....................................................................................4
b) Investment into ANZ stocks.....................................................................................4
Conclusion........................................................................................................................4
References.........................................................................................................................5
Appendix...........................................................................................................................6
2
Contents
Introduction.......................................................................................................................3
Que 1: calculation of returns.............................................................................................3
Que 2: calculation of total risk..........................................................................................4
Que 3: calculation of systematic risk................................................................................4
Que 4: Calculation of unsystematic risk...........................................................................4
Que 5: Suggestion.............................................................................................................4
a) Basis for selection of a stock....................................................................................4
b) Investment into ANZ stocks.....................................................................................4
Conclusion........................................................................................................................4
References.........................................................................................................................5
Appendix...........................................................................................................................6
Managing finance
3
Introduction:
The report explains about the risk and return position of ANZ Bank, Australia. It
briefs about the total return as well as total risk of the company. An investor is always
suggested to evaluate and analyze the risk and return of a security before investing into the
security. The analysis and evaluation about the investment into ANZ bank Australia has been
studied in the report.
Que 1: calculation of returns
The total daily returns, monthly returns and yearly returns of the company have been
calculated and following is the calculations:
Calculation of daily return
Average Return 0.03%
(Appendix)
Calculation of monthly return from daily returns
Daily average retune of
security 0.03%
Number of days in a month 30
Formula
(1+average return)^number of days
-1
Monthly return 1.02%
(Yahoo Finance, 2018)
Calculation of yearly return from Monthly returns
Monthly average retune of
security 1.02%
Number of days in a month 12
Formula
(1+average return)^number of days
-1
Monthly return 12.91%
It explains that the daily return, monthly return and yearly return of the stock is
0.03%, 1.02% and 12.19%.
3
Introduction:
The report explains about the risk and return position of ANZ Bank, Australia. It
briefs about the total return as well as total risk of the company. An investor is always
suggested to evaluate and analyze the risk and return of a security before investing into the
security. The analysis and evaluation about the investment into ANZ bank Australia has been
studied in the report.
Que 1: calculation of returns
The total daily returns, monthly returns and yearly returns of the company have been
calculated and following is the calculations:
Calculation of daily return
Average Return 0.03%
(Appendix)
Calculation of monthly return from daily returns
Daily average retune of
security 0.03%
Number of days in a month 30
Formula
(1+average return)^number of days
-1
Monthly return 1.02%
(Yahoo Finance, 2018)
Calculation of yearly return from Monthly returns
Monthly average retune of
security 1.02%
Number of days in a month 12
Formula
(1+average return)^number of days
-1
Monthly return 12.91%
It explains that the daily return, monthly return and yearly return of the stock is
0.03%, 1.02% and 12.19%.
Managing finance
4
Que 2: calculation of total risk
Calculation of total risk of the security is as follows:
Calculation of total risk
Comment
Standard deviation 1.22% STDEV of return
Variance 0.015% Square of stdev
Annualized variance 0.055364 (1+variance)^365 -1
Annualized standard
deviation 0.235295
sqrt of annualized
variance
(Yahoo Finance, 2018)
It explains that if the investors would invest into the security of ANZ bank than
the total risk of the investment would be 23.52% which is quite higher than the total
annualized return of the company.
Que 3: calculation of systematic risk
Systematic risk of the security has been calculated on the basis of volatility in the
stock price of the security and the market index. The systematic risk of ANZ bank is as
follows:
Calculation of Beta
Beta 1.239275319
(Appendix)
It explains that the systematic risk of the company is 1.239 which could not be
controlled by the company.
Que 4: Calculation of unsystematic risk
Further, unsystematic risk of the company has been calculated. The calculations of
unsystematic risk are as follows:
Unsystematic
risk 0.223142
Total risk-((Systematic risk
^2)*(market risk))
Systematic
risk 1.239275 Beta of security
Total risk 0.235295
Standard deviation of
securities
4
Que 2: calculation of total risk
Calculation of total risk of the security is as follows:
Calculation of total risk
Comment
Standard deviation 1.22% STDEV of return
Variance 0.015% Square of stdev
Annualized variance 0.055364 (1+variance)^365 -1
Annualized standard
deviation 0.235295
sqrt of annualized
variance
(Yahoo Finance, 2018)
It explains that if the investors would invest into the security of ANZ bank than
the total risk of the investment would be 23.52% which is quite higher than the total
annualized return of the company.
Que 3: calculation of systematic risk
Systematic risk of the security has been calculated on the basis of volatility in the
stock price of the security and the market index. The systematic risk of ANZ bank is as
follows:
Calculation of Beta
Beta 1.239275319
(Appendix)
It explains that the systematic risk of the company is 1.239 which could not be
controlled by the company.
Que 4: Calculation of unsystematic risk
Further, unsystematic risk of the company has been calculated. The calculations of
unsystematic risk are as follows:
Unsystematic
risk 0.223142
Total risk-((Systematic risk
^2)*(market risk))
Systematic
risk 1.239275 Beta of security
Total risk 0.235295
Standard deviation of
securities
Managing finance
5
(Appendix)
Que 5: Suggestion
On the basis of above calculations, some recommendation has been given to the
investors which are as follows:
a) Basis for selection of a stock:
A stock should be selected after evaluating and investigation over the return and the
total risk of the security. If the risk and return of the company is according to the industry and
it is balance than the stock is a good choice. Additionally, if the return from the stock is quite
higher than the total risk of the security then the stock is a good choice for the purpose of
investment (Cochrane, 2017). Earnings per share and market price of the stock against the
book value of the stock are also a base to analyze the stock.
b) Investment into ANZ stocks:
On the basis of the calculations of total risk, systematic risk, unsystematic risk and total
return of the stock, it has been evaluated that the ANZ stock is quite risky as well as the
return of the stock is also better. Though, it is suggested to investors to not to invest all the
money into the stock and should diversify the portfolio so that the good return could be
earned without any fear of risk (Brooks, 2015). As the unsystematic risk of the company is
lower which could be managed by the company but the systematic risk of the company is
quite higher and it could not be controlled by the company (İmrohoroğlu & Tüzel, 2014). So,
it is suggested to the investors to not to take risk and invest the amount into different stock.
Conclusion:
To conclude, the total risk of the company is quite higher than the total return of the
company and thus it is suggested to the investors to not to take risk and invest the amount
into different stock.
5
(Appendix)
Que 5: Suggestion
On the basis of above calculations, some recommendation has been given to the
investors which are as follows:
a) Basis for selection of a stock:
A stock should be selected after evaluating and investigation over the return and the
total risk of the security. If the risk and return of the company is according to the industry and
it is balance than the stock is a good choice. Additionally, if the return from the stock is quite
higher than the total risk of the security then the stock is a good choice for the purpose of
investment (Cochrane, 2017). Earnings per share and market price of the stock against the
book value of the stock are also a base to analyze the stock.
b) Investment into ANZ stocks:
On the basis of the calculations of total risk, systematic risk, unsystematic risk and total
return of the stock, it has been evaluated that the ANZ stock is quite risky as well as the
return of the stock is also better. Though, it is suggested to investors to not to invest all the
money into the stock and should diversify the portfolio so that the good return could be
earned without any fear of risk (Brooks, 2015). As the unsystematic risk of the company is
lower which could be managed by the company but the systematic risk of the company is
quite higher and it could not be controlled by the company (İmrohoroğlu & Tüzel, 2014). So,
it is suggested to the investors to not to take risk and invest the amount into different stock.
Conclusion:
To conclude, the total risk of the company is quite higher than the total return of the
company and thus it is suggested to the investors to not to take risk and invest the amount
into different stock.
Managing finance
6
References:
Brooks, R. (2015). Financial management: core concepts. Pearson.
Cochrane, J. H. (2017). Return Time-Varying Forecasts Risk Premiums and. The Fama
Portfolio: Selected Papers of Euge
İmrohoroğlu, A., & Tüzel, Ş. (2014). Firm-level productivity, risk, and return. Management
Science, 60(8), 2073-2090. Yahoo Finance. (2018). ANZ Bank. Retrieved from:
https://finance.yahoo.com/quote/ANZ.AX/history.
Yahoo Finance. (2018). AORD. Retrieved from:
https://finance.yahoo.com/quote/%5EAORD/history?p=%5EAORD.
6
References:
Brooks, R. (2015). Financial management: core concepts. Pearson.
Cochrane, J. H. (2017). Return Time-Varying Forecasts Risk Premiums and. The Fama
Portfolio: Selected Papers of Euge
İmrohoroğlu, A., & Tüzel, Ş. (2014). Firm-level productivity, risk, and return. Management
Science, 60(8), 2073-2090. Yahoo Finance. (2018). ANZ Bank. Retrieved from:
https://finance.yahoo.com/quote/ANZ.AX/history.
Yahoo Finance. (2018). AORD. Retrieved from:
https://finance.yahoo.com/quote/%5EAORD/history?p=%5EAORD.
Managing finance
7
Appendix:
ANZ Bank
Calculation of Daily return
Date Adj Close Return
01-04-2013 19.23717
02-04-2013 18.87005 -1.91%
03-04-2013 18.70986 -0.85%
04-04-2013 18.52296 -1.00%
08-04-2013 18.59638 0.40%
09-04-2013 19.01023 2.23%
10-04-2013 18.8567 -0.81%
11-04-2013 19.1504 1.56%
12-04-2013 19.16375 0.07%
15-04-2013 19.21715 0.28%
16-04-2013 19.26387 0.24%
17-04-2013 19.4174 0.80%
18-04-2013 19.34398 -0.38%
19-04-2013 18.9635 -1.97%
22-04-2013 19.0703 0.56%
23-04-2013 19.5242 2.38%
24-04-2013 19.95807 2.22%
26-04-2013 19.94472 -0.07%
29-04-2013 20.09157 0.74%
30-04-2013 21.25301 5.78%
01-05-2013 21.15288 -0.47%
02-05-2013 21.02606 -0.60%
03-05-2013 21.09281 0.32%
06-05-2013 21.03273 -0.28%
07-05-2013 20.81913 -1.02%
08-05-2013 20.99936 0.87%
09-05-2013 21.1187 0.57%
10-05-2013 20.80112 -1.50%
13-05-2013 20.77351 -0.13%
14-05-2013 20.63543 -0.66%
15-05-2013 20.69757 0.30%
16-05-2013 20.61472 -0.40%
17-05-2013 20.89088 1.34%
20-05-2013 20.87016 -0.10%
21-05-2013 20.46284 -1.95%
22-05-2013 20.22811 -1.15%
23-05-2013 19.42036 -3.99%
7
Appendix:
ANZ Bank
Calculation of Daily return
Date Adj Close Return
01-04-2013 19.23717
02-04-2013 18.87005 -1.91%
03-04-2013 18.70986 -0.85%
04-04-2013 18.52296 -1.00%
08-04-2013 18.59638 0.40%
09-04-2013 19.01023 2.23%
10-04-2013 18.8567 -0.81%
11-04-2013 19.1504 1.56%
12-04-2013 19.16375 0.07%
15-04-2013 19.21715 0.28%
16-04-2013 19.26387 0.24%
17-04-2013 19.4174 0.80%
18-04-2013 19.34398 -0.38%
19-04-2013 18.9635 -1.97%
22-04-2013 19.0703 0.56%
23-04-2013 19.5242 2.38%
24-04-2013 19.95807 2.22%
26-04-2013 19.94472 -0.07%
29-04-2013 20.09157 0.74%
30-04-2013 21.25301 5.78%
01-05-2013 21.15288 -0.47%
02-05-2013 21.02606 -0.60%
03-05-2013 21.09281 0.32%
06-05-2013 21.03273 -0.28%
07-05-2013 20.81913 -1.02%
08-05-2013 20.99936 0.87%
09-05-2013 21.1187 0.57%
10-05-2013 20.80112 -1.50%
13-05-2013 20.77351 -0.13%
14-05-2013 20.63543 -0.66%
15-05-2013 20.69757 0.30%
16-05-2013 20.61472 -0.40%
17-05-2013 20.89088 1.34%
20-05-2013 20.87016 -0.10%
21-05-2013 20.46284 -1.95%
22-05-2013 20.22811 -1.15%
23-05-2013 19.42036 -3.99%
Managing finance
8
24-05-2013 19.1097 -1.60%
27-05-2013 19.22706 0.61%
28-05-2013 19.38585 0.83%
29-05-2013 19.05446 -1.71%
30-05-2013 19.00614 -0.25%
31-05-2013 19.01304 0.04%
03-06-2013 19.22706 1.13%
04-06-2013 19.26848 0.22%
05-06-2013 18.77831 -2.54%
06-06-2013 18.54358 -1.25%
07-06-2013 18.43313 -0.60%
11-06-2013 18.55739 0.67%
12-06-2013 18.32956 -1.23%
13-06-2013 18.64714 1.73%
14-06-2013 19.20635 3.00%
17-06-2013 19.64129 2.26%
18-06-2013 19.59296 -0.25%
19-06-2013 19.57225 -0.11%
20-06-2013 19.08898 -2.47%
21-06-2013 18.92329 -0.87%
24-06-2013 18.90258 -0.11%
25-06-2013 18.90258 0.00%
26-06-2013 19.22016 1.68%
27-06-2013 19.68271 2.41%
28-06-2013 19.73104 0.25%
01-07-2013 19.20635 -2.66%
02-07-2013 19.662 2.37%
03-07-2013 19.24087 -2.14%
04-07-2013 19.46179 1.15%
05-07-2013 19.60677 0.74%
08-07-2013 19.42036 -0.95%
09-07-2013 19.78626 1.88%
10-07-2013 19.77246 -0.07%
11-07-2013 20.00719 1.19%
12-07-2013 19.82769 -0.90%
15-07-2013 19.98648 0.80%
16-07-2013 20.12455 0.69%
17-07-2013 19.88292 -1.20%
18-07-2013 19.98648 0.52%
19-07-2013 19.89673 -0.45%
22-07-2013 19.95886 0.31%
23-07-2013 19.96576 0.03%
24-07-2013 20.00719 0.21%
8
24-05-2013 19.1097 -1.60%
27-05-2013 19.22706 0.61%
28-05-2013 19.38585 0.83%
29-05-2013 19.05446 -1.71%
30-05-2013 19.00614 -0.25%
31-05-2013 19.01304 0.04%
03-06-2013 19.22706 1.13%
04-06-2013 19.26848 0.22%
05-06-2013 18.77831 -2.54%
06-06-2013 18.54358 -1.25%
07-06-2013 18.43313 -0.60%
11-06-2013 18.55739 0.67%
12-06-2013 18.32956 -1.23%
13-06-2013 18.64714 1.73%
14-06-2013 19.20635 3.00%
17-06-2013 19.64129 2.26%
18-06-2013 19.59296 -0.25%
19-06-2013 19.57225 -0.11%
20-06-2013 19.08898 -2.47%
21-06-2013 18.92329 -0.87%
24-06-2013 18.90258 -0.11%
25-06-2013 18.90258 0.00%
26-06-2013 19.22016 1.68%
27-06-2013 19.68271 2.41%
28-06-2013 19.73104 0.25%
01-07-2013 19.20635 -2.66%
02-07-2013 19.662 2.37%
03-07-2013 19.24087 -2.14%
04-07-2013 19.46179 1.15%
05-07-2013 19.60677 0.74%
08-07-2013 19.42036 -0.95%
09-07-2013 19.78626 1.88%
10-07-2013 19.77246 -0.07%
11-07-2013 20.00719 1.19%
12-07-2013 19.82769 -0.90%
15-07-2013 19.98648 0.80%
16-07-2013 20.12455 0.69%
17-07-2013 19.88292 -1.20%
18-07-2013 19.98648 0.52%
19-07-2013 19.89673 -0.45%
22-07-2013 19.95886 0.31%
23-07-2013 19.96576 0.03%
24-07-2013 20.00719 0.21%
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