Question: FIN 323 Major Assignment

This is a group research assignment. To complete this assignment, you need to download data from the internet and search for literature and information from broad sources. You are expected to compute/analyse the data and information by using the skills and knowledge covered in the subject. The final outcome of this assignment is a research report.

Each group is required to consist of two students and each group will submit one research report. In a particular situation, the subject coordinator is able to authorise three students a group. Group members are required to actively discuss and work for each part of the assignment. A group is expected to work among themselves but not refer to the work of any other groups. Any collusion and plagiarism will be heavily punished. The group will be formed on the basis of members' preference, i.e., a student is required to contact other students in your tutorial class to negotiate a group before week 3.

This assignment requires the use of MS Excel or some other statistical program that will allow you to complete the required calculations. All computer workings (formulae only) are to be shown in an appendix.

The word limit is 2,000 words. All assignments should be type in Times New Roman font, size 12 and line spacing 1.5. Please ensure your name, student number and page number are displayed on each page. Failure to meet any of these presentation requirements will result in a loss of marks.

Part A: Retrieve8 stocksprices from websites such as yahoo finance or tradingroom.com.au. Data up to one year will be sufficient, and is available free of charge from the above or other websites. Please note your data sources. All solutions to each question should be presented in tables that are readable to a novice investor.

In the body of your report, ensure you show how computed your calculations. In other words, show the formulae that you used.

i) Calculate the mean return, standard deviation, variance and holding period return for your portfolio of 8 stocks.

ii) Calculate the beta of the portfolio.

iii) Calculate the Expected Return of the portfolio.

Part B:

i) Comment on how your portfolio has performed relative to the ASX 200on the same selected period

ii) What is your portfolio expected return using the APT model which considers both the ASX 200 index factor and the inflation factor during your sample period? Inflation data are retrievable from the RBA website. Comment your results showing the difference between the alpha of this portfolio versus the alpha of the portfolio calculated in point i) above.

iii) Compute the Futures price on your portfolio by analyzing the following:

(a) Time to maturity of 3 and 6 months (hint: how does the price changes between a 3 month and a six month time to expire?)

(b) The current risk-free rate (i.e. the T-bill rate from the RBA website)

Part C: Find two Corporate Bonds from the Financial Review and assume that the first bond is an asset while the second bond represents liabilities. Show how to build a synthetic portfolio that is perfect immunized by applying the duration/convexity model.

(Hint: retrieve the yield together with the coupon and suppose that a $100,000 is your asset and $80,000 is your liability on a time frame of 10 years).