Corporate Finance
BAO2001
Assignment Semester 3 2017
Introduction
The focus of this assignment is on Risk and Return. The expectation is that students will develop technical skills in measuring returns, risk ssessment and analysis. Students are required to use the data provided in the case problem and exhibits to make various calculations with the view of producing a 500 word analytical report.
Nature of the assignment: Group Assignment with minimum 2 members and maximum 3 members
Assignment Components
The table given below contains monthly share price of ANZ Ltd and AGL Ltd with All share ordinary Index of Australian Stock Exchange..
Assignment Weighting
This assignment accounts for 10% of this unit’s assessment.
Guidelines for the Assignment
· Excel statistical functions have to be used to complete all statistical calculations.
· The standard of your presentation will be assessed and marked.
· Evidence of your team’s breadth and depth of research will be assessed.
· You need to reference. Marks will be deducted from assignments that fail to reference. (Use Harvard Referencing)
· There is an expectation that each team will work collectively rather than independently when completing this assignment. As members of a team you are all jointly responsible for the contents of your assignment.
· Due date: Refer to the unit Guide for submission date. An assignment drop box will be set-up in VU collaborative
Assignments submitted by individuals will NOT be accepted. This assignment requires each group to undertake independent research. No specific assistance will be provided to student groups in completing the assignment.
Table: End of the Month share price and ASXALL Index value
End of the month
|
ASXALL
|
AGL
|
ANZ
|
30/11/2014
|
5,388.60
|
11.36
|
24.88
|
31/12/2014
|
5,551.60
|
12.08
|
25.59
|
31/01/2015
|
5,898.50
|
12.80
|
27.40
|
28/02/2015
|
5,861.90
|
13.30
|
28.41
|
31/03/2015
|
5,773.70
|
13.29
|
26.36
|
30/04/2015
|
5,774.90
|
14.20
|
25.74
|
31/05/2015
|
5,451.20
|
13.60
|
25.93
|
30/06/2015
|
5,681.70
|
14.59
|
26.32
|
31/07/2015
|
5,222.10
|
14.78
|
22.49
|
31/08/2015
|
5,058.60
|
14.40
|
21.81
|
30/09/2015
|
5,288.60
|
15.08
|
21.91
|
31/10/2015
|
5,218.20
|
14.92
|
21.87
|
30/11/2015
|
5,344.60
|
16.30
|
23.70
|
31/12/2015
|
5,056.60
|
16.77
|
20.52
|
31/01/2016
|
4,947.90
|
16.53
|
19.01
|
29/02/2016
|
5,151.80
|
16.86
|
19.91
|
31/03/2016
|
5,316.00
|
16.90
|
20.60
|
30/04/2016
|
5,447.80
|
17.18
|
21.62
|
31/05/2016
|
5,310.40
|
17.82
|
21.44
|
30/06/2016
|
5,644.00
|
19.02
|
22.97
|
31/07/2016
|
5,529.40
|
17.14
|
23.91
|
31/08/2016
|
5,525.20
|
18.09
|
24.56
|
30/09/2016
|
5,402.40
|
18.21
|
24.76
|
31/10/2016
|
5,502.40
|
19.92
|
25.26
|
30/11/2016
|
5,719.10
|
20.97
|
28.18
|
31/12/2016
|
5,675.00
|
21.46
|
27.14
|
31/01/2017
|
5,761.00
|
22.90
|
28.63
|
28/02/2017
|
5,903.80
|
25.61
|
29.48
|
31/03/2017
|
5,947.60
|
25.99
|
30.35
|
30/04/2017
|
5,761.30
|
25.60
|
25.95
|
31/05/2017
|
5,764.00
|
24.77
|
27.64
|
30/06/2017
|
5,773.90
|
23.41
|
28.51
|
31/07/2017
|
5,776.30
|
23.30
|
28.29
|
31/08/2017
|
5,744.90
|
23.37
|
28.48
|
30/09/2017
|
5,976.40
|
25.27
|
28.79
|
31/10/2017
|
6,023.50
|
24.55
|
28.22
|
Assignment Task
- Copy and paste the data given in the table in to excel worksheet.
- Using the given price and index data estimate the monthly return
- Estimate the average (Mean) return and standard deviation for the given shares and for the market. Evaluate the risk and return characteristics of each stock and the market (if you feel, you can use the other statistics like maximum return, minimum return, median and normality for your analysis) .
- Estimate the coefficient of variation for the market and the two shares, Compare the risk and return characteristics.
- Explain how portfolio can change the risk and return an investor has to be endured.
- Estimate correlation coefficients between market and ANZ Ltd, Market and AGL Ltd, and AGL LTD and ANZ Ltd. Interpret the correlation coefficients you estimated.
- The standard deviation of returns for a portfolio consisting with 60% of AGL Ltd shares and 40% of ANZ Ltd. Evaluate your portfolio
- Estimate beta coefficient for both AGL LTD and ANZ Ltd. Interpret.
- You are required to present the statistics you estimated from task three to eight. Data table is not required to include in to your report. The softcopy of the excel worksheet should be able to present when ever asked.
REPORT
Your team is also required to produce an approximately
500 word
report that comments on the results calculated above. The report will need to refer to each statistic calculated and interpret (not simply summarise your results) the result and make comparisons amongst the market index and the two companies. Your team is required to specifically address what each statistic is actually measuring and its implications from a
risk and return
viewpoint. You will also need to focus on the impact of creating a portfolio of two shares and the implications for risk reduction (You will need to provide
some quantitative
evidence
of risk reduction). Furthermore, the Beta of each company needs to assessed and interpreted in the context of asset pricing. That is, what is the implication for risk and required return and what impact will this have on the asset’s price?