NMIMS Investment Analysis and Portfolio Management Sharpe Ra

Investment Analysis and Portfolio Management

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Q1. Exchange trades fund is a collection of different investments such as shares, bonds etc. The assets that are underlying are owned by the fund provider, who then forms a fund to track the performance and offers shares in that fund to investors. Shareholders own a part of an ETF but not the fund's assets. There are different types of exchange traded fund elaborate it.

Q2. Variance of portfolio depends on the proportion invested in different asset, variance of their return & covariance between their return. If Weight of asset 1 = 0.6 & weight of asset 2 = 0.4, 1 = 0.16, 2 = 0.34, covariance = 0.0064 calculate portfolio variance.

3a. An annualized total return is the geometric average amount of money earned by an investment each year over a given time period. If Initial NAV = 20, Current NAV = 25 holding period of 7 months. 7 months calculated on days basis comprises of 210 days. Calculate Annualized Return.

b. There are two stocks. Stock 1 & stock 2. Stock 1 gives 25% return & stock 2 gives 15% return. Risk free rate = 8%. SD of stock 1 = 10% & SD of stock 2 = 12%. Calculate sharp ratio for two stocks also inform which stock is higher risk adjusted returns?

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