MU - S1 2004 - Investment and Portfolio Management

MU - S1 2004 - Investment and Portfolio Management - OFFICE...

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Page 1 of 8 OFFICE USE ONLY Monash University Semester One Examinations 2004 Faculty of Business and Economics Department of Accounting and Finance EXAM CODES: AFF3121/AFW3121 TITLE OF PAPER: INVESTMENTS AND PORTFOLIO MANAGEMENT EXAM DURATION: 3 Hours READING TIME: 10 Minutes THIS PAPER IS FOR STUDENTS STUDYING AT: (office use only – tick where applicable) Berwick ± Clayton ± Peninsula ± Distance Education ; Open Learning ± Caulfield ; Gippsland ± Sunway ; Enhancement Studies ± Other (specify) ± Candidates are reminded that they should have no material on their desks unless their use has been specifically permitted by the following instructions. AUTHORISED MATERIALS CALCULATORS (except those with 26 alphabet keys) YES ; NO ± OPEN BOOK YES ± NO ; SPECIFICALLY PERMITTED ITEMS YES ± NO ; if yes, items permitted are: This paper consists of six (6) questions, one (1) formulae sheet and a Normal Distribution Table printed on eight (8) pages . PLEASE CHECK BEFORE COMMENCING. This is a FINAL examination paper. The total marks available in the examination are 120. This examination contributes 70% of the total assessment for this unit. Students must answer ALL questions on this examination paper. STUDENTS MUST PASS THE EXAMINATION (OBTAIN AT LEAST 60 MARKS OUT OF THE TOTAL 120 MARKS AVAILABLE ON THIS PAPER) AND OBTAIN AT LEAST 50% IN TOTAL ASSESSMENT TO PASS THE UNIT. THIS EXAMINATION PAPER MUST BE INSERTED IN YOUR EXAMINATION ANSWER BOOKLET/S AT THE COMPLETION OF THE PAPER. OTHERWISE A FAIL WILL BE RECORDED .
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OFFICE USE ONLY AFF3121/AFW3121 INVESTMENTS AND PORTFOLIO MANAGEMENT Page 2 of 8 QUESTION 1 The following are monthly percentage price changes for four market indexes. Month DJIA S&P500 Russell 2000 Nikkei -------------------------------------------------------------------------------- 1 0.03 0.02 0.04 0.04 2 0.07 0.06 0.10 -0.02 3 -0.02 -0.01 -0.04 0.07 4 0.01 0.03 0.03 0.02 5 0.05 0.04 0.11 0.02 6 -0.06 -0.04 -0.08 0.06 Compute the following. a) Expected monthly rate of return for each market index b) Standard deviation for each index c) Covariance between the rates of return for the following indexes DJIA and S&P500 S&P500 and Russell 2000 S&P500 and Nikkei Russell 2000 and Nikkei d) The correlation coefficients for the same four combinations e) Using the answers from parts a), b) and d), calculate the expected return and standard deviation of a portfolio consisting of equal parts of i) the S&P500 and Russell 2000 and ii) the S&P500 and Nikkei. Discuss the two portfolios. (2 + 4 + 4 + 5 +5 = 20 marks)
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MU - S1 2004 - Investment and Portfolio Management - OFFICE...

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