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Finance Case Study 1: Market Index and Portfolio Rate of Return

   

Added on  2020-07-23

9 Pages1917 Words374 Views
Finance Case Study 1

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3a....................................................................................................................................................31. Assessing historical monthly rates of return for the market index..........................................32. Computation of historical average return and standard deviation...........................................4b. Calculating portfolio’s historical average rate of return and standard deviation.....................43. Assessing expected rate of return by taking into account CAPM model................................54. Expected return of portfolio and beta......................................................................................65...................................................................................................................................................7CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9

INTRODUCTION Portfolio management may be served as process that is undertaken by the financialanalyst for the maximization of profit margin through reducing the risk level. This process ishighly significant which in turn helps invertors in investing money under suitable securities thatmakes value addition in the money. The present report is based on Bega Cheese, a leadingAustralian Diary company situated in New South Wales. In this, report will shed light on theaverage return pertaining to Bega Cheese, Reference and monthly market index. Further, reportwill provide deeper insight about the expected rate of return and beta associated with theportfolio. It also entails the manner through which portfolio risk and return can be calculated anddecision regarding investment is undertaken. a.1. Assessing historical monthly rates of return for the market index Bega Cheese(BGA)Reference CompanyAll OrdsAccumulatedMonthlymarketindexreturn17-Sep55459.817-Oct7.61%-8.00%57712.94.06%17-Nov4.90%-2.00%58813.51.91%17-Dec-6.23%7.00%60007.82.03%18-Jan-2.49%-2.00%59809.2-0.33%18-Feb-2.70%6.00%599160.18%Interpretation: The above depicted table shows that monthly market index returndecreased over the time frame. Graphical presentation entails that in the month of October 2017,market return accounted for 4.06% respectively. On the other side, in at the end of January 2018,return implied for -0.33%. This in turn considered as not a good indicator because volatility ofmarket has significant influence on the share’s return. In the month of January, return associatedwith the shares of Bega Cheese and Reference Company was negative. However, in month ofFebruary, position of market index has improved significantly and accounted for .18%respectively.

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