Question 2 Kamer is an investment fund that invests on the Ghana Stock Exchange. In recent times the economy has gone through four different cycles which analyst believe may be repeated in the years ahead. Kamet is reviewing its investment strategy and is looking for the best way to make good returns for its clients. The returns on three assets selected by Kamet are provided below: Starwin Probability 0.30 Assets Business Cycle Normal Boom Near Recession Recession You are required to: i. Compute the expected return and risk of each asset and advise Kamet as to which asset to invest more funds in on the basis of 0.40 0.10 ???? Assets Unilever 40% Percentage of funds invested 20% 20% a) expected retum on the assets b) riskiness of the assets (Hint: compute the coefficient of variation of each asser and select the asset with the lowest coefficient of variation; CV=) ii. Kamer has just informed you of three strategies (a), (b) and (c) that it wants to use. (a) In this strategy, Kamet will invest in the order of expected retum hence the highest proportion of its funds is to be invested starting from the asset that yields the highest expected retum irrespective of the risk level. The order is as follows: Tª Measured by Return 45% Tª Measured by Risk 45% 30% 50% Measured by Return 35% Unilever 30% Anglogold 30% (b). In this strategy, Kamet will invest in the order of riskiness of the assets hence the highest proportion of its funds is to be invested starting from the assets with the lowest risk irrespective of the expected return. The order is as follows. Measured by Risk 30% 40% 15% 30% Starwin 30% 3⁰⁰ Measured by Return 20% 3⁰ Measured by Risk Percentage of funds invested || 50% (c). In this strategy, Kamet will invest in the order shown below Assets Percentage of funds invested Compute the portfolio expected return for each of the strategies (a), (b), and (c) and advise Kamet as to the best strategy to select on the basis of the expected return you have computed. Page 2 of 5 Anglogold 40%

Question 2 Kamer is an investment fund that invests on the Ghana Stock Exchange. In recent times the economy has gone through four different cycles which analyst believe may be repeated in the years ahead. Kamet is reviewing its investment strategy and is looking for the best way to make good returns for its clients. The returns on three assets selected by Kamet are provided below: Starwin Probability 0.30 Assets Business Cycle Normal Boom Near Recession Recession You are required to: i. Compute the expected return and risk of each asset and advise Kamet as to which asset to invest more funds in on the basis of 0.40 0.10 ???? Assets Unilever 40% Percentage of funds invested 20% 20% a) expected retum on the assets b) riskiness of the assets (Hint: compute the coefficient of variation of each asser and select the asset with the lowest coefficient of variation; CV=) ii. Kamer has just informed you of three strategies (a), (b) and (c) that it wants to use. (a) In this strategy, Kamet will invest in the order of expected retum hence the highest proportion of its funds is to be invested starting from the asset that yields the highest expected retum irrespective of the risk level. The order is as follows: Tª Measured by Return 45% Tª Measured by Risk 45% 30% 50% Measured by Return 35% Unilever 30% Anglogold 30% (b). In this strategy, Kamet will invest in the order of riskiness of the assets hence the highest proportion of its funds is to be invested starting from the assets with the lowest risk irrespective of the expected return. The order is as follows. Measured by Risk 30% 40% 15% 30% Starwin 30% 3⁰⁰ Measured by Return 20% 3⁰ Measured by Risk Percentage of funds invested || 50% (c). In this strategy, Kamet will invest in the order shown below Assets Percentage of funds invested Compute the portfolio expected return for each of the strategies (a), (b), and (c) and advise Kamet as to the best strategy to select on the basis of the expected return you have computed. Page 2 of 5 Anglogold 40%

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter4: Analysis Of Financial Statements

Section: Chapter Questions

Problem 17P: CONCEPTUAL: RETURN ON EQUITY Which of the following statements is most correct? (Hint: Work Problem...

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