In Assessment 1, you have used Yahoo7!Finance to determine
holding period returns for BHP Billiton Ltd and Commonwealth Bank
of Australia. In this assessment, you will gain further experience
of using the resource.

Assume that you are acting as financial advisor for a firm.
You have a client who wants to develop a share portfolio through
investingin shares of BHP Billiton Ltd (symbol: BHP.AX),
Commonwealth Bank of Australia (symbol: CBA.AX), and Myer Holdings
Ltd (symbol: MYR.AX). The client has $10,000 to invest and is
seeking your advice regarding the following investment choices.

Investment ChoiceÂ Â Â Percentage of $10000
invested in BHP.AXÂ Â Â Percentage of $10000
invested in CBA.AXÂ Â Â Percentage of $10000
invested in MYR.AX

AÂ Â Â 30%Â Â
Â 35%Â Â Â 35%

BÂ Â Â 50%Â Â
Â 25%Â Â Â 25%

CÂ Â Â 35%Â Â
Â 25%Â Â Â 40%

Assume that expected return for all three companiesâ€™ shares
are the same as holding period returnsfor these sharesover the
period 1 Jan 2015 â€“ 30 Jun 2015 (the holding period returns are
to be calculated based upon closing prices at these two dates and
dividends attained between these two dates).

(a)Â Â Â Given these information and
presuming expected return of the portfolio as your only selection
criteria, which of the aboveinvestment choices will you advise the
client to adopt?

Â Â Â Â Â Â Â Â
Â Â Â Â Â Â Â Â Â
Â Â Â Â Â Â Â Â Â
Â Â Â Â [7 marks]

(b)Â Â Â Suppose, you are also given the
following (hypothetical) information:

ShareÂ Â Â Î²

BHP.AXÂ Â Â 0.97

CBA.AXÂ Â Â 0.80

MYR.AXÂ Â Â 2.00

Also, assume that your client is risk-averse. Will your
advice regarding the investment choices change due to the
above-indicated information for Î²? Why or why not?[7 marks]

(c)Â Â Â If your client build up a portfolio
through investing in many different companiesâ€™ shares, will the
client be able to completely eliminate risk for
investing?Explain.Â Â Â Â Â
Â [6marks]

[NOTE:For this question, you need to refer to at-least three
references. One of the references is the textbook; and the others
can be any web based reference/textbook/journals/articles or other
resources. The idea of this question is to encourage you to do a
bit of research on relevant topics.]

Q2. Bond Valuation- General

Suppose Mr. M is considering investments into the bond
market. He considers two bonds:

Bond A:

This bond has a face value of $100, and coupon of 8% paid
annually. The bond matures in 10 years.

Bond B:

This is a zero-coupon bond, which also has a face value of
$100 and matures in 10 years.Interest is compounded annually.

Given the above information:

(a)Â Â Â Determine the price of the bonds, if
Mr. Mâ€™s required rate of return is 8% p.a. for both bonds.
Â Â Â Â Â Â Â Â
Â Â Â Â Â Â Â Â Â
Â Â Â Â Â Â Â Â Â
Â [2 x 2 = 4 marks]

(b)Â Â Â Assume Mr. Mâ€™s required rate of
return is also the market rate of interest on similar bonds. Given
this assumption, which of these bonds sells for a discount and
which sells at par value? Â Â Â Â Â
Â Â Â Â Â Â Â Â Â
Â Â Â Â Â Â Â Â Â
Â Â Â Â Â Â Â [2 marks]

(c)Â Â Â Suppose, Mr. M buys the zero coupon
bond (Bond B C) now, which matures in 10 years, for $85. After a
year, he sells the bond for $95.Â Determine the bondâ€™s
yield to maturity (YTM) at the time when Mr. M buys it and at the
time when he sells it.Â Â Â Â Â
Â Â Â Â [4 marks]

â€ƒ

### Other samples, services and questions:

When you use PaperHelp, you save one valuable — TIME

You can spend it for more important things than paper writing.