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Finance Discipline Group
UTS Business School
25721 Investment Management
Assignment Part I – Worth 15%
Autumn 2023
Assessment Task
Part 1 of the Assignment requires that you complete three questions that look at
share prices, asset return/risk and mean-variance optimisation. You must complete
Part 1 of the Assignment as an individual. Computations can be done in EXCEL, but
the solutions are to be pasted into Word and formatted for submission. You need to
provide explanations and discussion of your work and answers.
Data Description – The data to be used in the Assignment is in the EXCEL
worksheet titled AssignmentPart1Data_2023Autumn.xlsx. The worksheet
contains monthly closing prices from December 2012 to December 2022 for
stocks in six (6) listed companies, the ASX200 and the Reserve Bank of
Australia’s (RBA) cash rate target. Note: The cash rate is expressed as a
percentage per annum (p.a.). The simple monthly cash rate can be estimated
by dividing the annual rate by 12.
EXCEL Calculations – You should complete the Lecture 1: Exercises on
EXCEL and go through the calculations in Lecture 2: Weights Optimum
Portfolio before beginning work on the Assignment. This will give you a basic
understanding how to use EXCEL to do calculations. To assist you doing some
of your calculations you might like to go to EXCEL “Options” and include the
“Add-ins”, “Solver” and “Analysis Tool Pak”.
Submission Requirements
Due date – A softcopy of the Assignment and your EXCEL spreadsheet must be
submitted online on Canvas by 5.00pm Friday 31st March 2023.
Late submissions will not be accepted.
Your Assignment will only be marked if you attach the cover sheet (available
on Canvas) to the front of your Assignment and write your student number,
name and sign the cover sheet.
Format – The final Assignment, including all text, tables and figures should be printed
out on A4 paper with a minimum font size of 12. The Assignment, excluding the cover
sheet and pages with graphs/diagrams, should not exceed 10 pages in length.
Post questions on “Discussions” in Canvas. Note that email is not an efficient
way for asking questions about the assignment. You can also arrange a Zoom
consultation with Tiffany or Ron.
If any parts of your Assignment are found to not be your own work or contain
sentences that are identical or similar to those in assignments submitted by
other students; on a solution or feedback sheet provided to students in a
previous semester; or copied from a source and not correctly referenced, a
breach of Student Rule 16.2.1(1)
http://www.gsu.uts.edu.au/rules/student/section-16.html) will have occurred.
This breach will be reported to the University as Academic Misconduct and you
will receive a mark of zero for the assignment.
Question 1: Share prices and Apps- 5 marks (3 marks for content and 2 marks
for expression)
During the COVID period share trade apps became very popular with retail investors
and this popularity has been growing. Construct time series graphs of the monthly
share prices for the six (6) listed companies in the data set
AssignmentPart1Data_2023Autumn.xlsx. Briefly describe whether or not you feel
that using these graphs is more, less or just as useful as using apps when trading
shares in the six companies.
Note: You can read the article 16th April 2022 “New apps are enticing fresh investors,
but are they turning share trading into a game ” by Anthony Segaert and Nick
Bonyhady and list of “The best investment and stock trading apps in Australia (2023)
available on Finder (https://www.finder.com.au/buy-and-sell-shares-app)
Question 2: Risk and return – 5 marks (3 marks for content and 2 marks for
expression)
Use the data in the EXCEL worksheet AssignmentPart1Data_2022Autumn.xlsx to
calculate the risk, return and correlation of the six companies using continuous returns.
(i) Explain how events over the past ten years might have influenced the risk and
return of each of these companies. (ii) Using your correlation estimates, choose the
two companies that you would include in a two-company portfolio. Explain why you
chose these companies.

Note: The following statistics need to be estimated – monthly average continuous
returns for each of the entities, the ASX200 and cash rate; sample standard deviations
of the monthly continuous returns for each of the companies and the ASX200; and
sample correlations based on the monthly continuous returns for each pair of the six
(6) companies.
Question 3: Mean-Variance optimisation – 5 marks (3 marks for content and 2
marks for expression)
A funds manager has $5,000,000 to invest on behalf of a group of investors. These
investors only want to invest in two assets and have a risk aversion factor of 3. The
manager decides to invest in the shares of the two companies that you chose in your
answer to Question 2 (ii).
i. Construct the optimum two asset portfolio that invests in these two companies
and allows short selling to occur. Show how you did your calculations and list
the estimated the weights and dollar amounts invested in each of the
companies and the portfolio’s risk and return.
ii. Explain one reason why the weights of the companies are different or the
same.
iii. Draw a fully labelled mean-standard deviation diagram that shows the position
of the optimal portfolio in (i) according to an efficient frontier and a utility curve.
Explain in your own words why the portfolio has this position in the diagram.
The diagram can be hand drawn.
iv. You then decide to include a risk-free asset in the portfolio. Construct the
optimum portfolio that contains a two-asset portfolio of the risky companies that
you chose in your answer to Question 2 and a risk-free asset. Show how you
did your calculations and list the weights and dollar amounts invested in each
of the companies and the risk-free asset and the portfolio’s return and risk.
v. Explain one reason why the weights of the companies and risk-free asset are
different or the same.
vi. Draw a fully labelled mean-standard deviation diagram that shows the positions
of the optimal portfolio in (iv) according to an efficient frontier, capital market
line and a utility curve. Explain in your own words why the portfolio has this
position in the diagram. The diagram can be hand drawn.
Note: Use the statistics calculated in Question 2 to estimate the weights, return and
risk. Assume the average cash rate will be the return on the risk-free asset. If you use
Solver to do any of your estimations, you must also explain how trial and error could
be used.