23 Jun Comment on your results (within worksheet “A11”).
Comment on your results (within worksheet “A11”).
? In worksheet “A12”: Suppose it is January 1st, 2014 and your client wants to invest funds for one month in a portfolio consisting of a risk free asset and a “synthetic” asset formed by blending a fraction of your companys share, a fraction of a share in an ETF which tracks the S&P 500, and a fraction of a troy ounce of gold. Use the January 1st 2014 monthly interest rate in worksheet “A2” as the risk free rate in January 2014.
? Identify the least risky of the following risky assets: your assigned company, S&P 500, and gold.
? Assume your client has a mean-variance utility function over portfolio returns and variance. Calculate the value of the utility parameter ?? for which 100% of the portfolio is invested in the “synthetic risky” asset (this value of ?? should be identical to the value of ?? in task ?-?)
?Use the following value for the mean-variance utility parameter:
? If your ID # ends with the numbers 0, 2, 4, 6, 8 then use: ??=1.02 ×Value of parameter ?? in step ? ? If your ID # ends with the numbers 1, 3, 5, 7, 9 then use: ??=0.98 ×Value of parameter ?? in step ?
Use Solver to calculate the fraction of the portfolio invested in the “synthetic” risky asset and the risk free asset subject to the constraint that the portfolio risk is less than or equal to the risk of the least risky asset identified in step ?. Use Solver to generate “limits” and “sensitivity” reports.
Comment on your results (within worksheet “A12”).
? Use the “limits” and “sensitivity” reports in task ? to answer the following question: “what is the impact on the portfolio return in step ? when the risk of the least risky asset in step ? increases by 1%? Explain your answer in the relevant report (i.e. answer or sensitivity report).
TECHNICAL INSTRUCTIONS FOR PROJECT 2:
Submission: Please submit this project through the “Project 2 Assignment” Tab in ECO 204 Blackboard by 11 pm, Wednesday, December 30th, 2015. The Excel file must be named Lastname_Firstname. Penalty for late submissions: 5% for each day after deadline. It is your responsibility to name the file as it appears in ROSI. Failure to do so will result in a 5% penalty per incident.
If Blackboard is officially down at the due time and date (see example1) then the deadline of this project is automatically extended by 24 hours; if after 24 hours Blackboard is still down then the deadline of this project is automatically extended by 24 hours, and so on. Do not e-mail the project to the course staff.
1 For example: the project is due on December 1st 11 pm and Blackboard is “down for maintenance on December 1st from 6 pm to midnight”.
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