{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Revision_Tutorial_2009

# Revision_Tutorial_2009 - BUS3026W Finance II 2009 Revision...

This preview shows pages 1–2. Sign up to view the full content.

BUS3026W Finance II 2009 – Revision Tutorial Due: Not for hand-in ___________________________________________________________________ Question 1 Abigail Grace has a R900 000 fully diversified portfolio. She subsequently inherits shares in ABC Company Ltd. worth R100 000. Her financial advisor provided her with the following information: Risk return characteristics Expected Return Standard Deviation Original Portfolio 15% 36% ABC Company 9% 21% The correlation coefficient of ABC share returns with the original portfolio returns is 0.40. The T-Bill rate in the market is 8%. a) The inheritance changes Grace’s overall portfolio and she is deciding whether to keep the ABC shares. Assuming Grace keeps the ABC shares, calculate the: i. Expected return of her new portfolio which includes the ABC shares. ii. Covariance of ABC share returns with the original portfolio returns. iii. Standard deviation of her new portfolio which includes the ABC shares. b) Would you recommend that Grace keep the ABC shares? Justify your response.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern