(30% of final marks)
Suppose you are working in an Investment Bank, a client with limited investment knowledge requests you to create a portfolio with a minimum required annual return of 20%. The client claims he is a risk-averse investor and his initial investment is £100,000. Please propose an investment plan for your client based on his expectation and the following requirements.
This project requires you to use 2 years daily adjusted-close prices (from 01 March 2013 to 27 February 2015) of real listed company stocks. The data can be obtained from Yahoo Finance. Please use MS Excel to perform the calculations.
The risk-free asset is assumed with an annual rate of return of 4%.
Section 1: Choose five different companies’ stocks that potentially can be used to construct a portfolio. You are required to:
Section 2: Based on your analysis of the five companies’ stocks in Section 1, construct Portfolio A that comprises of two companies’ stocks from the five. This portfolio should meet the client’s 20% annual return requirement and you are required to:
Section 3: Since the client is risk-averse, construct Portfolio B by combining one risk-free asset with the two company stocks (risky assets) that you selected for Portfolio A.
Remember, your client is not an expert in Finance theory, therefore, please interpret and comment on your technical analysis results so he would be able to understand. You need to provide a report with 2000 words (appendix and reference list are not included). Please include your key Excel output as an appendix.
Total 100 marks
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