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Mr. Seamisang invested P12,000 in savings. P6,000 was invested in Treasury bills yielding 6% return. The remaining P6,000 was invested in shares of 4 companies, with expected returns ranging from 7.6% to 18.8% and betas ranging from 0.2 to 1.6. The summary provides details on calculating the expected return and beta of the overall portfolio, achieving a 12% return by adjusting the Treasury and market investments, constructing a portfolio with a 10.32% return using only Treasury bills and the market, and advising on which overall portfolio option has more significance to investors.

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Aobakwe Rose Tshupelo
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45 views

Class Work

Mr. Seamisang invested P12,000 in savings. P6,000 was invested in Treasury bills yielding 6% return. The remaining P6,000 was invested in shares of 4 companies, with expected returns ranging from 7.6% to 18.8% and betas ranging from 0.2 to 1.6. The summary provides details on calculating the expected return and beta of the overall portfolio, achieving a 12% return by adjusting the Treasury and market investments, constructing a portfolio with a 10.32% return using only Treasury bills and the market, and advising on which overall portfolio option has more significance to investors.

Uploaded by

Aobakwe Rose Tshupelo
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Class Work

Mr Seamisang savings of P12 000. Of this amount he has invested P6000 in in a Treasury
bills security which currently yields a return of 6%. The remainder has been invested in a
portfolio of four different companies’ shares. Details of the portfolio are as follows

Company expected return beta worth of shareholding

Akola 7.6% 0.20 P1 200

Akofa 12.4% 0.80 P1 200

Akere 15.6% 1.20 P1 200

Akae 18.8% 1.60 P2 400

You are required to

a) Calculate the expected return and beta value of Mr Seamisang’s savings portfolio
b) Mr Seamisang has decided that he wants an expected return of 12% on this savings
portfolio. Show how he will achieve this by selling of his Treasury stock and
investing the proceeds in the market portfolio.
c) If Mr Seamisang was only to invest in Treasury bills and the market portfolio, what
savings portfolio would be required to give him an expected return of 10.32%.
d) If Mr Smith wants to choose between his existing savings portfolio (as in (a)) and the
one constructed in (c), which would you advice and why?
e) Explain the significance, if any, of beta value to investors in listed companies.

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