Assignment of finance Essay Example

Question 1

assignment of finance= (12.72 + 0.255) / 12.13 = 1.06

assignment of finance 1= 5695 / 5226 = 1.09

assignment of finance 2= (27.42 + 1.13) / 23.45 = 1.22

Question 2

Perpetuity =
assignment of finance 3 = 100,000/0.11 = $909,091

Question 3

Technical analysis is a strategy that is based on the most recent movements in stock prices to make a decision on whether to buy or sell a stock. Charts are used to predict patterns in stock prices to enhance returns. However, there is a rather strong and consistent empirical evidence against this form of analysis. There is simply no value in using past trading data as a trading strategy for timing the purchases and sales of securities. According to weak-form efficiency, no investor can earn excess returns by developing trading rules based on historical price and return information. Besides, it has been found that technical trading analysis does not spawn superior returns after marking adjustments for transactions costs and taxes.

Fundamental analysis is based on economic, industry, and company data to determine a fundamental value for a stock. The data involves a firm’s dividend prospects, earnings, risk evaluation and expectations of future interest rates. But the EMH predicts that this is doomed to fail. In particular, the semi strong-form efficiency indicates that no investor can earn excess returns from trading rules based on any information available to the general public. This strategy only rewards analysts with unique insight. It is a difficult path to follow.

Question 4

Portfolio variance =
assignment of finance 4 +
assignment of finance 5 +
assignment of finance 6

  1. Portfolio variance = 0.32 * 0.122 + 0.72 * 0.062 + 2 * 0.3 * 0.7 * 1 = 0.00306 + 0.42 = 0.42306

  2. Portfolio variance = 0.32 * 0.122 + 0.72 * 0.062 + 2 * 0.3 * 0.7 * 0.5 = 0.00306 +0.21 = 0.21306

  3. Portfolio variance = 0.32 * 0.122 + 0.72 * 0.062 + 2 * 0.3 * 0.7 * 0 = 0.00306 + 0 = 0

  4. Portfolio variance = 0.32 * 0.122 + 0.72 * 0.062 + 2 * 0.3 * 0.7 * -1 = 0.00306 + -0.42 = -0.42306