25. Your client Ama Boahemaa has GHS100,000 to invest in the Tek 5 Index and the...

 

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25. Your client Ama Boahemaa has GHS100,000 to invest in the Tek 5 Index and the GoG 10-year bond. The yield on the GoG 10-year bond is 16.5%. The Tek 5 Index consists of five technology equity stocks. Below are the prices and shares outstanding as of the end of the past five years: Month Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 PT 8.55 8.85 9.12 9.75 9.98 Stock Price (GHS) DML PKA 9.42 9.2 9.62 9.87 10.22 10.54 10.62 10.75 11.15 11.26 Shares outstanding ('000) Month PT DML Dec-18 10,000 15,000 Dec-19 10,000 17,000 Dec-20 12,000 17,000 Dec-21 12,000 17,000 Dec-22 12,000 17,000 PKA 9,000 9,000 9,000 9,000 9,000 SFH 18.22 18.41 18.78 19.21 19.47 SFH 5,500 5,500 7,500 7,500 7,500 EAH 7.78 7.85 8.22 8.82 9.11 EAH 14,500 14,500 14,500 14,500 14,500 Required: (a) Using the value-weighted approach (you may assume a base index of 1,000), i) Compute the Index value at the end of each year. ii) Compute the yield on the index for each year. Compute the standard deviation in the returns on the Tek 5 Stock Index (b) Assume your client invests 60% of her money in the GoG 2-year notes and 40% in the Tek 5 Index. Compute the rate of return on the complete portfolio. 25. Your client Ama Boahemaa has GHS100,000 to invest in the Tek 5 Index and the GoG 10-year bond. The yield on the GoG 10-year bond is 16.5%. The Tek 5 Index consists of five technology equity stocks. Below are the prices and shares outstanding as of the end of the past five years: Month Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 PT 8.55 8.85 9.12 9.75 9.98 Stock Price (GHS) DML PKA 9.42 9.2 9.62 9.87 10.22 10.54 10.62 10.75 11.15 11.26 Shares outstanding ('000) Month PT DML Dec-18 10,000 15,000 Dec-19 10,000 17,000 Dec-20 12,000 17,000 Dec-21 12,000 17,000 Dec-22 12,000 17,000 PKA 9,000 9,000 9,000 9,000 9,000 SFH 18.22 18.41 18.78 19.21 19.47 SFH 5,500 5,500 7,500 7,500 7,500 EAH 7.78 7.85 8.22 8.82 9.11 EAH 14,500 14,500 14,500 14,500 14,500 Required: (a) Using the value-weighted approach (you may assume a base index of 1,000), i) Compute the Index value at the end of each year. ii) Compute the yield on the index for each year. Compute the standard deviation in the returns on the Tek 5 Stock Index (b) Assume your client invests 60% of her money in the GoG 2-year notes and 40% in the Tek 5 Index. Compute the rate of return on the complete portfolio.

Answer rating: 100% (QA)

a Using the valueweighted approach we can compute the index value at the end of each year by calculating the market value of each stock and then summi... View the full answer