- Your client wants to build an investment portfolio with his savings. He is being
offered to buy 2 different funds, a fixed income fund and an equities fund, with
the following information:
Expected return Volatility Correlation
5,5% 5% -0,45
Equities fund 14% 17%
a. Which % would buy of each one if your client wants to get the
maximum possible return? Which are the expected returns and
volatility of this portfolio?
b. If your client wants to follow a conservative path and have a portfolio
that minimizes risk what % would buy of each fund (minimum variance
portfolio)? What would be the expected return and the volatility of this
portfolio of funds?
- Stock A and B have the following characteristics:
Expected return Volatility
Bond A 6% 12%
Stock B 14% 20%
Their correlation is 0. The risk-free interest rate is 2%.
a. Consider a portfolio, with 80% in Bond A and 20% in the risk- free
asset. What is the portfolio´s expected return and volatility?
b. Consider another portfolio, which consists of 30% of Stock B and 70%
in the risk free asset. What is the portfolio´s expected return and
c. Consider another portfolio, which consists of 80% of Bond A and 20%
of Stock B. What is the portfolio´s expected return and volatility?
d. Calculate Sharpe ratio for the previous 3 portfolios. Which one is more
e. Is it attractive for you to choose the risk free investment as part of your
portfolio? Why do you think may be attractive for you?
- Given this stock and Index:
Return Volatility Correlation
BNPP 6% 14% 0,6
CAC40 Index 3% 5%
- Compute Beta. Explain what it means.
- Compute BNPP Alpha. Explain what alpha means.
- Provide the expected return for BNPP if the CAC40 grows a
- Describe the mean – variance portfolio theory (Markowitz).
- Describe the main difference between the Sharpe´s Market portfolio theory
and the CAPM
- Explain if any of these 2 statements are correct or incorrect and briefly justify
Statement 1: The investment policy statement is an initial step of the portfolio
management process. The investment process should be changed according
to the change of market trends.
Statement 2: The primary purpose of the monitoring process in portfolio
management is to measure the performance of a client’s portfolio relative to
the performance of the stock market benchmark over a comparable period of
- The asset risk free offers a return of 2%. If the Expected return for the market
portfolio is 15% with a volatility of 20%
a. Would it be reasonable buy shares on asset A with a Beta of 0,70
with an expected return of 10%? Explain why
b. And a share with a Beta of 1.25 with an expected return of 19%?
c. And if risk free is 5% instead? Does a larger risk free change anything
on your previous investment decisions? If so, why?
- Briefly describe what information each of the following 3 ratios measure:
a. Sharpe Ratio
b. Treynor Ratio
c. Alpha Jensen
- Complete the table below. Risk free is 4% (show the steps followed on your
Fund Return σf Βf Sharpe
A 9% 7% 0,75
B 15% 12% 1,1
C 13% 10% 1,2
D 17% 14% 1,3
Market 11% 6% 1
Has performed better than the market? (YES/NO)
Fund Sharpe ratio Treynor ratio Alpha Jensen
- You can build a portfolio of two assets, A and B, whose returns have the
Expected return Volatility Correlation
Share A 10% 20% 0,4
Share B 12% 25%
If you demand an expected return of 11%, what are the portfolio weights?
What is the portfolio’s standard deviation?
- Assume the following Characteristic Line equation for these 3 assets:
a. RBNPP = 0,20% + 1,50 * RCAC40 + UBNPP
b. RTotal= 0,05% + 1,10* RCAC40 + UTotal
c. REDF = 0,50% + 0,90 * RCAC40 + UEDF
d. Assume a portfolio of 30% BNPP, 30% Total and 40% EDF.
i. Portfolio Beta
ii. Portfolio Alpha
iii. Expected return if CAC40 growth is 4%
- Business case:
a. Consider the following indices:
i. S&P 500 TR
ii. Nikkei 225 Average PR JPY
iii. FTSE 100 TR GBP
iv. MSCI BRIC GR USD
v. MSCI EMU GR USD
vi. MSCI Pacific Ex Japan GR USD
vii. S&P Latin America 40 TR
b. Download historical daily or weekly data for each one of these indices
from 2001 until today.
c. You are a portfolio manager who advises a client to diversify his
investments. Your client, who is watching every day many hours of
CNBC and Bloomberg from 2001 when he retired, suspects your
advise to buy all the indices above will not guarantee he will achieve
much diversification. He does believe these indices tend to move
strongly together and he does not buy your argument only sometimes
in the past due to macro events his arguments may be true. How
would you convince him?
Hint: diversification is highly related to correlation, so you may need to
consider looking at the correlation of these indices. Consider looking
at the evolution of these indices between 2001 to today, but then the
evolution of this correlation in sub periods (like 2001-2012, 2007- to
2015, 2015-2017, 2018-19…)
n the linguistically plural settings of India, English often acts as the link -language among people of different dialect. For many educated Indians English is virtually the first language. Thus in the present context English is playing a vital role in bringing together people from different regional languages for a closer exchange of social, educational and administrative network of India . It provides a linguistic tool for the administrative cohesiveness of a country (Kachru 1986a: 8). English is used in both public and personal domains and its functions “extend far beyond those normally associated with an outside language, including the instrumental, the regulative, the interpersonal and the innovative, self-expressive function” (Hohenthal citing Kachru 1986a: 37, 2003))6. As pointed out before, the role of English is not replacive: it overlaps with local languages in certain domains (Kandiah citing Sridhar, 1985;Shridhar and Shridhar, 1986; 1991: 273)7. English language in Indian Education System English is taught as a second language at every stage of education in all states of India and has been accepted as the main medium of instruction in higher education. English is also the state language of two states in eastern India, Meghalaya and Nagaland. In India, English has become an integral part of the curriculum almost at all levels of education. However there are various social, political and cultural factors that affect the position of English in different boards, universities and other institutions. Even the curriculum offered and evaluation tools employed are very diverse across the country. The model of English offered to the learners lacks uniformity and it is this question that continues to challenge the policy makers and education planners. While most States accord English the position of second language, some others treat is as the third language; the regional language and the national language getting precedence. as in other linguistically and culturally pluralistic societies, the position of English is determined by various political, cultural and social considerations. Kachru (1986b:20 cited in Hohenthal , 2003)8 sees primarily three questions which continue to be discussed. The first question concerns the position of English in early and in higher education. The second question is concerned with the roles of the regional language, Hindi and English. The third question deals with the model of English presented to Indian learners, and how that presentation can be made uniformly and effectively. The Government of India has primarily been concerned with the first two questions, which are directly related to language planning at both the national and state levels. There are, as yet, no a>GET ANSWER