Question

In: Finance

1. On January 15, 1990, you constructed a portfolio consisting of 1,000 shares of General Electronics,...

1. On January 15, 1990, you constructed a portfolio consisting of 1,000 shares of General Electronics, 500 shares of Boeing, and 1,500 shares of Microsoft. You close the portfolio by selling all shares by March 3, 2020. (20 pt.)

What is the original value of the portfolio?
What is the portfolio value at the portfolio closing date?
Create a graph of portfolio’s value staring from the original date to closing date. Show the graph below.
Looking at the graph, did you close the portfolio at its peak? If no, what is the maximum value you could have gained if you would have been able to sell the portfolio at the peak. (Hint: Use max function in R, Google is the best resource).
Using Chartseries, create a graph from January 2018 to 2020 of portfolio value. Show the graph below.

At the end, copy your R code in the file.

2. For the period from January 15, 1990 to March 3, 2020, using weekly stock returns data of the following companies, answer the following questions (20 pt.) –

Fill in the following table

	GE	BA	MSFT
CAPM beta
Standard deviation of stock returns
Correlation of stock returns with the returns of S&P 500 returns
Sharpe ratio

Based on CAPM, find out the consequence of a 10% decrease in market return on GE, BA, and MSFT, respectively.
Based on Sharpe ratio, which stock are you going to choose for a highly risk averse investor and which stock are you going to choose for a highly risk-loving investors and why? Explain in detail.

Expert Solution

a. & B. The data has been sourced from Yahoo Finance. The calculation is based on End of the Day closing price.

The beginning and ending portfolio would be

	GE	Boeing	MSFT	Portfolio Val
No of Shares	1000	500	1500
Date/ Closing Price
15-Jan-90	5.02	19.79	0.60	15,811.00
3-Mar-20	11.21	289.27	172.79	415,029.98

The opening portfolio value on 15 Jan, 1990 = No. of shares of GE X Closing Price + Noo. of shares of Boeing X Closing Price + No. of shares of MSFT x Closing price of MSFT

Portfolio Valueon Jan 15, 1990 = $15,811

Portfolio Value on March 3, 2020 = $415,029.98

Similar formula is used for all respective dates

C. The graph is based on daily closing prices of GE, Boeing &MSFT multilied by the respective shares held for each of them.

D. Using the max function in the data, the portfolio has the maximum value on 10th Feb 2020.

Max Value of the Portfolio

468,295.00

The data has over 7000 rows, so it cant be put here.

jeff jeffy answered 1 year ago

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