Portfolio theory
Prof. Samuele Murtinu
Finance course Prof. Samuele Murtinu
Agenda

Markovitzs model
Expected Return of a Portfolio
Volatility of a TwoStock Portfolio
Volatility of a Large Portfolio
Risk Versus Return: Choosing an
Efficient Portfolio
T
Portfolio Theory Exercises
By: Keivan Aghasi
Ex. 1
1. The figure below shows the oneyear return distribution for RCS stock.
Calculate:
a. The expected return.
b. The standard deviation of the return.
Ex. 1
Ex. 2
Ex. 3
Characterize the difference between
Portfolio Theory Exercises II
By: Keivan Aghasi
Ex. 17
Ex. 17
Ex. 18
For the portfolio in Problem 17, if the correlation between Johnson &
Johnsons and Walgreens stock were to increase,
a. Would the expected return of the portfolio rise or fall?
b. Would
Principles of balance
sheet, income statement,
and cashflow statement
cashProf. Samuele Murtinu
Finance course Prof. Samuele Murtinu
Source: Financial Statement Analysis (Prof. Marco Giorgino)
Finance course Prof. Samuele Murtinu
General information on f
Payout policy
Prof. Samuele Murtinu
Finance course Prof. Samuele Murtinu
Agenda
 Distributions of Cash to the Shareholders
 Comparison of Dividends and Share Repurchases
 The Tax Disadvantage of Dividends
 Payout Versus Retention of Cash
 Signaling w
Chapter 9: Stock Valuations
Exercises
Lecturer:
Keivan Aghasi
The Exercises
1. Assume Evco, Inc., has a current price of $50 and will pay a $2 dividend
in one year, and its equity cost of capital is 15%. What price must you
expect it to sell for right aft
Course of Finance Como 2015
Exercises Time Value of Money
By: Keivan Aghasi
Ex. 1
Calculate the future value of $2000 in a. Five years at an interest rate of
5% per year. b. Ten years at an interest rate of 5% per year. c. Five
years at an interest rate
Time value of money,
interest rates, discount
rates, present value and
NPV decision rule
Prof. Samuele Murtinu
Finance course Prof. Samuele Murtinu
The interest rates and the time value
of money
Financial decisions
costs and benefits at different POINTS I
ModiglianiModiglianiMiller
theorem
Prof. Samuele Murtinu
Finance course Prof. Samuele Murtinu
Does an optimal firms financial
firms
structure exist?
exist?
Are the different channels through which a firm raises capital equivalent?
Otherwise, do financing
Finance Course Como 2015
Valuing Bonds Exercises
By: Keivan Aghasi
Ex. 1
A 30year bond with a face value of $1000 has a coupon rate of
5.5%, with semiannual payments.
a. What is the coupon payment for this bond?
b. Draw the cash flows for the bond on a
Valuing bonds
Prof. Samuele Murtinu
Finance course Prof. Samuele Murtinu
Agenda
 Definition of bonds (FIXED INCOME SECURITIES)
 Relationship between bond prices and their yield to maturity
Finance course Prof. Samuele Murtinu
Definition of bonds
Bond: s