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Imagine, finally, that you are applying for a position as an analyst at Blackstone Asset Management. You are attending a testing session today. Some basic portfolio analysis skills will be tested. You have been given two series of prices (below) and you guess that you will have to compute the expected return and standard deviation (risk) for the two assets and portfolios containing different combinations of them. The companys recruiters have made it clear that you can bring your spreadsheet files with you to the test and that you should prepare a basic framework with as much work pre-done as possible.

	Breville			Monadel
Date	Price	Dividend		Price	Dividend
1/12/2018	10.66			13.77
1/01/2019	10.98			14.77
1/02/2019	15.75	0.18		17.81
1/03/2019	16.28			17.35	0.25
1/04/2019	19.24			18.95
1/05/2019	16.88			19.07
1/06/2019	16.36			18.81
1/07/2019	19.23			18.93
1/08/2019	16.26			15.91
1/09/2019	16.1	0.18		15.75	0.23
1/10/2019	15.34			15.34
1/11/2019	16.98			16.02
1/12/2019	17.36			16.5
Beta	1.15			Beta	1.40

Your Mentors Advice: This should be relatively easy. BUT Dont forget that the prices must be converted to returns before you can start computing averages, covariance or standard deviation. Once you have two returns series, you can compute all these things very easily using Excel. You will have to be prepared to work out the portfolio expected return for different weights, so it might be best to set up a spreadsheet based on a calculation for the equally weighted portfolio and then change the weights once you know what they are. Given that the data set contains information about the betas, you might also expect questions based on the Capital Asset Pricing Model (CAPM).

Q1.

What is the standard deviation for a portfolio that is 80% invested in Breville with the remainder in Monadel?

Select one:

a. 14.33%

b. 9.08%

c. 12.31%

d. 11.00%

e. 6.77%

Q2

If the market's expected rate of return increases from 5% to 10%, by how much should the expected returns for both Breville and Monadel increase?

Select one:

a. It is impossible to say without information about the risk free rate of return

b. Breville's expected return should increase by 5.75% while Monadel's expected return should increase by 7%

c. Breville's expected return should increase by 4.05% while Monadel's expected return should increase by 6.98%

d. Breville's expected return should increase by 20.12% while Monadel's expected return should increase by 18.09%

e. Breville's expected return should increase by 115% while Monadel's expected return should increase by 140%

Answer & Explanation Solved by verified expert

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