As a finance major student of the UWI OC, you have just landed a lucrative job as a Financial Planner with First Citizens Investment Services (FCIS), a major financial services company in your home country. Your first assignment is to help one of its major clients Solar Inc., invest in a high end stock. Solar Inc.’s CEO is impressed with Samsung’s performance over the years and have asked you to explore the possibility of including a Samsung stock in its current stock portfolio. You have come up with the following historical information for Samsung. Beginning Price Ending Price Dividend paid per year 2011 $68.20 $72.45 $45.00 2012 72.45 85.50 50.00 2013 85.50 98.74 58.00 2014 98.74 122.60 65.00 2015 122.60 136.85 70.00 A. Based on the above information, you are to examine the annual rate of return, the average return for the five year period (assuming that the probability of returns are equal for each year), the standard deviation of returns for the past five years and the coefficient of variations of returns. Based on your calculations, what advice can you give to Solar Inc. if the CEO has indicated that the company will only want to invest in a stock with a coefficient of variation of returns below 0.75. Your employer was very impressed with your performance so far, and has granted you the privilege of helping Mr. TJ Welsh, a long standing client of the company, who is indecisive about which combination of assets to add to his portfolio. FCIS have been observing the performance of three assets for some time now, and have forecasted the following expected returns for the following three assets and asked you to make a determination on the best option for Mr. Welch. Year Expected Return Asset A Asset B Asset C 2017 16.00 17.00 14.00 2018 17.00 16.00 15.00 2019 18.00 15.00 16.00 2020 19.00 14.00 17.00 You have explored three options for Mr. Welsh which include: (a) full 100 percent investment in Asset A, (b) 50 percent in asset A and 50 percent in asset B, (c) a 50 percent in asset A and 50 percent in asset C. B. Given the above investment options, and the forecasted information, you were asked to determine the expected returns, standard deviation of returns and coefficient of variation of returns for each of the three options and provide your Manager with a recommendation for investment for Mr. Welsh. You must also provide the workings as part of your report and comment on the correlation for options AB and AC. You next client, is Office Pro, a producer of office furniture and you were asked to evaluate the risk and return of two assets (Asset S and Asset T) which it is considering for its asset portfolio. You checked online for the company’s financial statements and found the following historical data for the two assets for the past ten years. Asset S (Beta 0.9) Asset T (Beta = 1.5) Year Dividends paid ($) Opening Value ($) Closing Value ($) Dividends paid ($) Opening Value ($) Closing Value ($) 2007 1000 20000 22000 1500 20000 20000 2008 1500 22000 21000 1600 20000 20000 2009 1400 21000 24000 1700 20000 21000 2010 1700 24000 22000 1800 21000 21000 2011 1900 22000 23000 1900 21000 22000 2012 1600 23000 26000 2000 22000 23000 2013 1700 26000 25000 2100 23000 23000 2014 2000 25000 24000 2200 23000 24000 2015 2100 24000 27000 2300 24000 25000 2016 2200 27000 30000 2400 25000 25000 You believe that the past years are a good indicator of the future performance of the assets and the assets risks can be assessed on a standalone basis using standard deviation and coefficient of variation and as a part of Office Pro’s existing portfolio of assets using the Capital Asset Pricing Model (CAPM). C. Your Manager, has asked you to prepare a report which will assist in making a decision for Office Pro. The following are some of the highlights of your report, assuming the market has a risk-free rate of 8 percent and the return on the market is 15 percent: 1. The Rate of Return for each Asset per year for 2007 to 2016. 2. Each asset’s average rate of return based on the historical annual data provided. 3. Asset S and Asset T’s standard deviation and coefficient of variation. 4. Comment on the risk and return for each asset based on your answers to 2 and 3 above. 5. The required return for each asset. 6. A recommendation on investing in which the two assets, giving reasons for your recommendation. 7. Comment on the use of standard deviation as oppose to the use of CAPM as a risk measurement. Present your assignment as a three part report, providing the necessary details and recommendations to your Manger for each of the above mentioned clients. Kindly state all assumptions made in your recommendations/workings. Let’s see if you will be entitled for a pay raise.