The goal is to answer the 6 questions below (Please read the attached excel spreadsheets, Consists of 9 Stocks). Companies are listed in the excel spreadsheets.
In the first class meeting, I will form groups consisting of 3-4 students; each group will represent an investment committee. As part of your pre-class assignment, each student will have identified at least three investment candidates.Once your group is determined, you will discuss these investment choices and jointly decide how to allocate a $1 million budget. At the next class meeting, the investment committee (each group) will review the portfolio and decide whether to make any changes. All investments must be US primary securities (no options, futures or
commodities), exchange-traded and have a unique ticker symbol. All buys/sells can only be done at the closing price on the day of the class. For simplicity, we will assume that transaction costs are a flat $50 per buy/sell. Each group will make a short 5-10 minute presentation each week outlining the reasons for their portfolio selections and
changes thereto (if any). If there are no changes, the group will simply report on the portfolio value as of the class date. This exercise is to get us thinking about the theory and practice of stock selection. Because this portfolio is going to be evaluated over a short 8-week period, everyone starts with 89 points and if your portfolio value is less than $1 million at the end of eight weeks, you end up with 87 points (B+). However, for every 40 basis point (0.4 percent) improvement, you get 2 points. So if your portfolio is worth between $1004000 and $1008000 at the end, you score 91 points and so on. Short-selling is allowed if you think any stock (or the market) is overvalued. Proceeds of short-sales are assumed to earn an annualized yield of 4 percent, which coincides with the borrowing rate on the short position. I will explain this in detail prior to your first investment committee decision. A group paper and presentation is required for this
project. At the end of this course each group is required to submit a written paper on their portfolio that addresses the following:
Attached are excel spreadsheets of the already analyzed stocks:
Please answer the questions below:
1.Calculate the expected return of each one of your stock using the CAPM formula.
2. Find the beta of each one of your stocks from Yahoo finance.
3. Calculate the expected return and beta of your portfolio.
4. Compare the expected return that you calculated and compare it to the actual return of your portfolio.
5. How much was the total return of your portfolio?
6.How did your portfolio perform in relation the market (NASDAQ, S&P, etc.)?
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