Portfolio of Investment Consisting Assignment
Added on 2020-07-22
14 Pages1353 Words30 Views
Finance
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................11. Information of shortest maturity notes in Australia.................................................................12. Computation of monthly return on shares and price indexes of company and market...........13. Computation of expected return of each of the shares............................................................14. Calculation of beta for shares..................................................................................................15. Applying CAPM model and calculating fair return of shares.................................................16. Draw security market line of ASX market..............................................................................17. Plot shares on graph of security market line............................................................................2CONCLUSION................................................................................................................................3REFERENCES................................................................................................................................3
INTRODUCTIONFinance is required in every business so that it may accomplish activities in effectivemanner. Present report deals with preparation of portfolio of investment consisting of shares.Wesfarmers Ltd and six other companies' portfolio of investment is formed in this report(Baulkaran, Jain and Sunderman, 2018).1. Information of shortest maturity notes in AustraliaThe risk free rate of the shortest maturity notes in Australia is 9.1 % on treasury notes ofless than five years (Brock, 2018).2. Computation of monthly return on shares and price indexes of company and marketMarket Return (RM) of Wesfarmers is 20.85, CBA is 499.9, Westpac is 495.7, BHP LTDis -5.69945, Rio tinto is -0.49793, NAB is 623.1, AUS. AND NZ BANKLING GP is 1070.5(Bouamara, N and et.al, 2018).3. Computation of expected return of each of the sharesExpected return is 11.75 of Wesfarmers, Return for CBA is 490.8, Return for Westpac is486.6, Return for BHP LTD is -14.799448, Return for Rio tinto is -9.597929, for NAB is 614,for AUS. AND NZ BANKLING GP is 1061.4(Campbell and Kassa, 2018).4. Calculation of beta for sharesThe beta is calculated as -0.34457 for Wesfarmers. For CBA, Westpac, BHP LTD, Riotinto, NAB and AUS. AND NZ BANKLING GP are 0.9949964, 1.366045, -0.1977687, -0.4288712, 1.317257007, 1.343156 respectively (French, 2018). 5. Applying CAPM model and calculating fair return of sharesCAPM = RF + Beta (RM - RF)Where RF is Risk free rate, RM is Market Return= 9.1+-0.34457 (11.75)= 102.8763For Westpac is 5092.777497 (Huynh, Nguyen and Duong, 2018,)For CBA is 4954.624233 (McNevin and Nix, 2018)For BHP LTD is -131.74811 (Phadkantha, Yamaka and Tansuchat, 2018)For Rio tinto is -83.224879 (Sherwood and Pollard, 2018)1
For NAB is 6396.1958 (Thamprasert, Pastpipatkul and Yamaka, 2018)For AUS. AND NZ BANKLING GP is 11084.365786. Draw security market line of ASX marketSecuritiesRate of ReturnBetaCAPMRisk free9.1-0.344579.1Market20.85120.85Stock11.759.1COMMONWEALTH BK.OF AUSSecuritiesRate of ReturnBetaCAPMRisk free9.10.9949969.1Market499.91499.9Stock490.989.12
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