#529 Write an article on Pakistan’s economic performance

Write an article on Pakistan’s economic performance - Business Statistics

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Free Chegg Question

Q1)  

1. Write an article on Pakistan’s economic performance pre & post impact of Covid-19? (Minimum words 250)
2. Briefly explain the difference between Markowitz Modern Portfolio Theory & Single Index Model approaches? What is the basic difference between these two approaches?

Q2)  

You are working as a portfolio associate and your manager assigned the task to find out which investment option is feasible for the existing portfolio. All of the investment options are riskier than the market however still manager wants to optimize its risk in given investment options.

Requirements:

1. Calculate the Average of each of the investment options.
2. Calculate the Risk of each of the investment options.
3. Calculate the Coefficient of Variation of each investment option.
4. Calculation of correlation of each of the investment options.
5. Calculate the Beta of each of the investment options.
6. Give your conclusion or recommendation which investment option is best for you in comparison to the least risky.

Q3)  

You are working in an investment advisory firm where your primary job is to support your clients in their investment decisions by guiding them according to their risk appetite.

Mr. Kashif wants to invest 5 million while he doesn’t have any idea how to make a portfolio that would be diversified enough to mitigate the risk. Though, you asked a few questions from Mr. Kashif to know his financial health and potential to bear losses.

1. Kashif is 42 years old and working in a privately owned company.
2. He has 3 children, ages of the children are 7, 11, and 15, and the elder one is about to go to college which required annual fees of PCR 150,000.
3. He wants to earn at least a return that compensates for the inflationary pressure in the future. The current inflation rate of Pakistan is hovering around 8.90%.
4. According to him, he believed, he can able to take more risk.
5. He also planned for a leisure trip with his family after 3 years which required PCR 2 million.

Being an advisory you gathered all the relevant data to consult him in a better way.

Allocation	Portfolio A	Portfolio B	Portfolio C
Cash	5%	20%	5%
Equities	20%	25%	60%
Money Market Funds	60%	40%	15%
Gold	15%	15%	20%
Total	100%	100%	100%
Expected Return	15%	18%	22%
Volatility	17%	20%	25%

Requirements

Suggest which investment portfolio is feasible for Mr. Kashif in order to fulfill his objectives?

Q 4)                                                                                                                             5 Marks

Alpha Beta Investment Company gathered the data to recommend stocks that are undervalued in the market according to Capital Assets Price Model (CAPM).

Stock	Current Price	Dividend	Price after a year	Beta
A	50.00	2.50	55.00	2.50
B	42.00	1.20	47.00	1.40
C	20.00	0.50	22.00	0.80

Market consensus for Risk free rate = 7% and Risk premium = 6%

Requirements

1. Calculate the Expected Return & CAPM derived return.
2. Highlight the under & overvalued companies based on SML.

Q 5)                                                                                                                             5 Marks

The portfolio manager wants to optimize the riskiness of the two assets portfolio with the given statistics below:-

Assets	Return	Volatility	Weight
A	17.00%	15.00%	40.00%
B	21.00%	25.00%	60.00%

Correlation

-0.70

-0.35

0.25

0.50

0.70

Requirements

Calculate the two assets portfolio standard deviation at different correlation levels which are mentioned above and suggest at which correlation is best suited to your portfolio.

 

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Free Chegg Answer

Q 4)

Expected return = (Dividend + Closing price)/ Opening price - 1

Expected return for:

A = (2.5+55)/50 -1= 15%

B = (1.2+47)/42 -1= 14.76%

C = (0.5+22)/20 -1= 12.5%

CAPM return = Risk free rate + Beta (Expected market return - risk free rate)

or CAPM return = Risk free rate + Beta (risk premium)

CAPM return for:

A = 7% + 2.5 * 6% = 22%

B = 7% + 1.4 * 6% = 15.4%

C = 7% + 0.8 * 6% = 11.8%

SML is created in similar way, only that Beta = 1

SML = 7% + 1 * 6% = 13%

Under valued companies = A, B as their CAPM return is more than SML, if people buy more of these the market of share will increase, hence increasing the base price used to calculate return, so the return offered by stock will go down.

Using same logic, over valued company = C