Tutorial 2 Solutions

1. How to compare different assets in investment selection process? 2. What are the quantitative characteristics of the assets and how to measure them? 3. How does one asset in the same portfolio influence the other one in the same portfolio? 4. And what could be the influence of this relationship to the investor’s portfolio? 5. What is relationship between the returns on an asset and returns in the whole market (market portfolio)?

Which of the following are the key factors when determining asset allocation for an investment? I. Time an investor has until he needs to use the money from the investment (time horizon) II. Risk preferences (tolerance for risk) III. Current financial situation   a. I., II., & III.   b. I. & III.    c. II. & III.   d. I. & II.

1. Why methods and tools of the statistics are so important in investment decision making. 2. Explain, why doesn’t an estimated absolute covariance number tell the investor much about the relationship between the returns on the two assets?

Describe the major steps in the construction of an investment portfolio.     plz give the point wise deep explaination.

Asset pricing Models provide a logical basis for computing the risk premiums anddetermining the asset price. Describe using CAPM and APT. Also differentiatebetween CAPM & APT. Also discuss its assumptions. This question is related to  Investment Analysis and Portfolio Management

What is the MOST important variable of the financial planning process? Select one: a. The costs b. The capacity of the fixed asset c. The pro forma income statement d. The sales forecast

Describe the principles of asset valuation. Distinguish between the required rate of return and expected rate of return. Based on the asset valuation, how do the investors make investment decisions using the required rate of return?

describe the stages in the financial process and discuss the advantages of a process driving approach to investment decision making. a- discuss the theory of efficient markets with specific reference to its applicability in investment decision-making. b- Discuss the issues surrounding the PE-based value of investment valuation.

Can you help me with this please? explanation of the characteristics of investment appraisal decisions and theadvantages and disadvantages of the IRR.

Which of the following statements is true regarding the sensitivity analysis approach to investment appraisal? a. It involves changing many factors at the same time b. It provides an indication of the likelihood of changes in the key factors c. It provides managers with clear guidance concerning the investment decision d. It is commonly called ‘how-now’ analysis e. Noneoftheabovearetrue

Compare and contrast the MPT with the CAPM with reference to the following aspects: Risk measurement; Risk-return graphical presentation – Capital Market Line (CML) versus Security Market Line (SML); Usage in portfolio management.

Whenever you make an investment decision, you need to consider its impacts on the diversification of your portfolio and the allocation of your assets. a. false b. depends c. maybe d. true

Explain why income, budget, age, holging period and risk taking capacity helps in making the best options for investment selections and manage a portfolio. Include examples.

Prepare a detailed analytical report that encompasses the following areas. Nature of investment markets, the Primary and secondary investment markets. Also brief discussion on the money market and capital market providing key differences between the two. Five stages of the investment management process providing key points that will ensure the success of the investment decision.

Explain why risk and uncertainty should be considered in the investment appraisal process.

Demonstrate the link between net present value and internal rate of return and how they may be used in conjunction with one another to evaluate investments.

While comparing investment returns is an important starting point in evaluating investment performance, it represents which part of the analysis?

What text and supplemental information, is there a best choice for using any one specific method of investment valuation, or do you have more than one?

Which of the following tools is sometimes used to rank investment proposals? 01. 02. 03. 04. 05. Project assessment guide (PAG). Investment opportunity index. Annuity index. Profitability index. Capital ranking index.

Which of the following best explains the role of diversification as part of an investment strategy?   a.Choosing investment vehicles with varying levels of risk/reward   b.Spreading investments out over time   c.Balancing investment amounts with debt amounts   d.Soliciting the opinions of multiple financial planners

Your client is evaluating the upside and downside of a potential investment. What stage of the Financial Planning process is this? O Routine Allocation O Indemnification O Assessment

1. How important is risk to returns? 2. What are the key elements that must be analyzed in this regard before an investment decision is made?

How We use quantitative data to manage risk and create investment vehicles?

(b) Discuss and distinguish the following concepts a. Money markets and capital markets b. Asset Allocation and Asset Selection c Active and passive Investment strategies d. Technical and Fundamental Analysis

The strategy that is used to determine the long-term policy asset weights in a portfolio is called O a. strategic asset allocation. O b. tactical asset allocation. O c. integrated asset allocation. O d. sector rotation. O e. insured asset allocation.

why net present value is considered to be superior to internal rate of return as an investment appraisal method? Critically evaluate and give an example if possible

Using the data generated in the previous question (Question 1) Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML?

Which of the followings is NOT in the scope of investment planning? a. To develop a risk-free investment portfolio for the client by choosing different types of asset classes. b. To analyse the risk appetite of the client c. To assess the liquidity needs of the client d. To analyse rhe financial objectives and lifestyles of the client

Asset allocation is performed to A) reduce the load that intermediaries charge maximize the earning potential of an B) investment vehicle C) maximize the earning potential of a portfolio protect against significant declines in any D) one investment vehicle O E) maximize the returns from any one vehicle

Describe Asset/Liability Models and explain why it is better than Value-at-Risk Models for Portfolio Management.