Assignments: Term Project
Your group will create an equity portfolio composed of 10 large firms that broadly reflect the economy. [Each firm must have at least one bond issue with a term remaining to maturity of 8 to 12 years.] Using the 10 equities you will create three different portfolios of $1 million. The fist portfolio will be weighted by the market values of the equities. The second will be weighted by price and the third will be an equally weighted portfolio. [See Section 2.4 of textbook.] You will also create a bond portfolio by selecting one bond issue from each of the 10 companies. These bonds will have maturity dates between 10 and 20 years from now. [Good site for this data is www.finra.org/marketdata] You will also select a US Treasury security with a maturity of 10 to 15 years. [Good site for this data is www.wsj.com. Click on Markets tab then on Bonds. Scroll down to a table on left side "Bond Market Overview". At bottom of that table click on "See Full Daily Closing Prices". That brings up data for all outstanding Treasuries by maturity date. Historical prices are also available.]
You will observe the performance of these securities for a year starting Feb. 1, 2017 and ending Jan. 31, 2018. You will record the actual closing prices (not the adjusted closing prices) for the equities on the first and last day as well as everyTuesday during the one year period. For the bonds, you will record the prices and yields to maturity on the same date as for the equity values. For the bonds, you will create and equally weighted portfolio, using a $1,000 face value bond for each. You will also keep track of the Dow Jones Industrial Average (DJIA)and the S&P 500 index on each of the observation dates.
You will analyze how your equity portfolios performed over the year. In particular, you will look at how they performed against the two benchmark indexes. You will compare and contrast this to your bond portfolio.You will also need to answer the following questions;
What are the weights for each stock in each portfolio on the starting date and on the ending date?
What are the weighted average betas of your 3 stock portfolios (using starting prices)?
What are the standard deviations of return for each stock and for the 3 portfolios.
What are the standard deviations of returns for the DJIA and S&P 500 over the year?
What is the holding period return (HPR) for each stock and for each portfolio?
What is the HPR for each bond and for the bond portfolio?
What ratings are assigned to each bond by the rating agencies?
How did the bond portfolio perform compared to the Treasury bond you tracked?
Would you say you were adequately compensated for your risk in the equity portfolio and in the bond portfolio?
Information related to above question is enclosed below:
Attachment:- 20180226005041term_project_notes_finance.rar