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Risk and Return - Exercise

BTVN Risk and return

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nguyenquynhanh30805
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28 views4 pages

Risk and Return - Exercise

BTVN Risk and return

Uploaded by

nguyenquynhanh30805
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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NPV and IRR

1. Assume that Gerhardt Corporation is considering a capital investment of €50 million today that is expected
to return after-tax cash flows of €16 million per year for the next four years plus another €20 million in Year
5. The required rate of return is 10%, what is the NPV of this investment? What is the IRR of this
investment?

2. What is the NPV of this investment given required rate of return of 10%. What is the IRR of this investment?
Create NPV profile for this investment.

3. Projects A and B have similar outlays but different patterns of future cash flows. Project A realizes most of
its cash payoffs earlier than Project B. What is the crossover rate (the interest rate that makes NPVs of both
projects equal)? Is there any conflict between NPV and IRR if the required rate of return is 10% or 20%?
IRR of the difference
Time 0 1 2 3 4
Project A -200 80 80 80 80
Project B -200 0 0 0 400
Find the difference btw Difference
each year

IRR Diference:

If we use IRR => always choose A


If we use NPV => depends on the discount rate
The higher the discount rate, the lower the NPV
Holding period return (HPR)
số lượng nhân lên để xem gain/loss bao nhiêu
4. An investor purchased 100 shares of a stock for $34.50 per share at the beginning of the quarter. If the
investor sold all of the shares for $30.50 per share after receiving a $51.55 dividend payment at the end of
the quarter, the holding period return is closest to: Calculate the total cost of the investment:
100 shares * $34.50/share = $3,450
P1=30.50 Calculate the total revenue from selling the shares:
P0=34.50 100 shares * $30.50/share = $3,050
Add the dividend payment to the revenue:$3,050 + $51.55 = $3,101.55
I1=51.55 Calculate the net gain or loss:$3,101.55 - $3,450 = -$348.45
Calculate the holding period return (HPR):HPR = (Net gain or loss / Initial
investment) * 100%HPR = (-$348.45 / $3,450) * 100% ≈ -10.13%
=> Loss $7.759
sấp xỉ 10.1%
5. An analyst obtains the following annual rates of return for a mutual fund, the fund’s holding period return
over the three-year period is closest to:

Assume P0=1

Xem vở nha

6. An analyst follows a stock and records the price over the last 5 trading days as follows. Calculate daily
returns and HPR over the last 5 trading days. Daily return starts from day 2

Day Stock A Price Daily return


1 100
2 102 2% DR = (102 - 100)/100 * 100 = 2%

3 101 -0.98%

4 105 3.96%
5 104 -0.95%

HR over the last 5 trading days: (104-100)/100 * 100 = 4%

Risk and return of an asset

7. An analyst follows a stock and records the price over the last 5 trading days as follows. Calculate stock
average return, variance, and standard deviation.

Day Stock A Price Daily return Bảng như trên

1 100 Có thể xem thêm cách tính phương sai, trung bình mẫu kĩ hơn trong sách
chapter 2
2 102
Stock Avarage Return
3 101
4 105
5 104 Variance: s^2

Standard deviation
Risk and return of a portfolio

A portfolio manager creates the following portfolio.

8. If the correlation of returns between the two securities is 0.40, the expected standard deviation of the
portfolio is closest to:

Tính variance => expected standard deviation

9. If the standard deviation of the portfolio is 14.40%, the correlation and covariance between the two
securities is equal to:

Standard deviation => variance = 0.144^2

A portfolio manager creates the following portfolio:

cho sẵn s của 2 asset

10. If the portfolio of the two securities has an expected return of 15%, the proportion invested in Security 1
is:
Assume W1 + W2 =1 => đúng trong thực tế kiểu khi portfolio có 10 tr thì tách 6tr cho stock 1 4 tr cho stock 2 => trọng số là 1

Expected return (two asset) = W1 * EAR1 + W2 * (EAR2)

11. If the correlation of returns between the two securities is −0.15, the expected standard deviation of an
equal-weighted portfolio is closest to:
50/50
12. If the two securities are uncorrelated, the expected standard deviation of an equal-weighted portfolio is
closest to:
uncorrelated => r = 0 => cov = 0 => bỏ phần nhân đằng sau trong sp^2

A portfolio manager creates the following portfolio:

Security Security weight (%) Expected return (%) Expected variance (%2)
1 50 13 400
2 25 6 81
3 25 15 441

Covariance between (%2)


1 and 2 45
1 and 3 189
2 and 3 38

13. Calculate portfolio expected return, variance and standard deviation.

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