Compounded Annual Returns

 
 
 

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Compounded Annual Returns

Question 1

Find 10 years share price and dividends’ of two Malaysian publicly listed companies and
subsequently answer the questions a, b and c below.
a) Critically analyse the basis of choosing the companies. (10 marks)
b) Calculate the discretely compounded annual returns and the respective risk for both firms.
Analyse your answer. (20 marks)
c) Calculate the continuously compounded annual returns and the respective risk for both firms.
Which is the better investment of the two? Analyse your answer. (20 marks)
Show all the calculation
Question 2
Suppose that the annual returns on two shares are perfectly negatively correlated and that =
0.07, = 0.20, , and . Assuming that there are no arbitrage opportunities, by
using the Goal Seek function (excel) calculate the weight (proportion) of the two assets that
produce the lowest portfolio variance? (Use the Goal Seek function) (30
marks)
Question 3
You believe that there is a 20% chance that Astro company’s share will drop by 11% and 80%
chance that it will increase by 17%. In addition, there is a 25% chance that OCK Group Berhad
company’s share will drop by 15% and a 75% chance that it will increase by 24%. The
covariance is 0.009. Calculate the expected return, the variance, the standard deviation, and the
correlation for each share. (20
marks)
PART B: (100%)
Question 4
You are 30 years old today and decided to apply for a postgraduate in finance. Your current
annual salary is RM36,000 and is expected to grow by 4% annually. Graduates in finance earns
RM50,000 upon graduation, with salaries growing by 3.5% yearly. Cost of the 2 years of study
is RM25,000 per year which should be paid at the end of each study year. If your retirement age
is 67 and the discount rate is 7% annually, is it worthwhile to quit your current job and do your
Finance for Managers- FIN6013– GSB SEGi University |
3
postgraduate? What is the IRR of your study?
(50 marks)
Question 5
Analyse the FOUR (4) advantages and disadvantages of fund raising either from bond or share
to the company’s performance. (50 marks)
Requirement of the assignment:
The length of assignment is between 1,800 to 2,000 words (part A: 1000 words, Part B: 1000
words), tables, figures, appendices, etc. The assignment should be arranged in the following
manner:
? Individual Assignment Cover Sheet- SEGi
? Title page
? Table of contents
? Body of assignment including, introduction, content and conclusion
? References – Minimum 10 references. Use Harvard system.
? Appendix
? Turnitin Report
a. The similarity index should be as minimum as possible (e.g., it should be less than or equal to
15%). Report that exceeds 15% or without the Turnitin report will not be graded. 5 marks
will be deducted from the total marks graded for violating this rule.
b. To submit Turnitin Originality Report online and print the cover page – Please use your full
name to create the account.
Resubmission
• Resubmission to improve the grade of assignment is allowed. Resubmission is only
allowed for one time and within a stipulated period before the final exam.
• The maximum mark of re-work assignment is 65/100.

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