An asset manager is asked to show the performance of his investing strategy by creating a...
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An asset manager is asked to show the performance of his investing strategy by creating a wealth index. This index should include capital gain and dividend payments during the investment horizon of one calendar year to capture the overall growth impact of his/her investment strategy to showcase performance of the investing strategy to a potential client - a large pension fund. You are required assist the investment manager in developing this index. You have following information available with you Capital gains and dividends received during the year 2020 are provided in table 2. Table 2 capital gains and dividends in 2020 Month Jan-2020 Feb-2020 Mar-2020 Apr-2020 May-2020 Jun-2020 Jul-2020 Aug-2020 Sep-2020 Oct-2020 Nov-2020 Dec-2020 Capital gains £5 -£3 -£5 -£10 £7 £11 -£3 £8 £1 -£4 -£2 £3 Dividends 0 0 £2.5 0 0 £1.5 0 0 £1 0 0 £2 Required: a) Find the ending price for each month for data provided in table 2. Create the price series if a representative investor has allocated an initial capital of £100 (in Dec-2019). (10 marks) b) Can this monthly price series be used as a wealth index? Comment. (3 marks) c) What is the growth rate of this price series index on yearly basis? (5 marks) d) Using calculations, evaluate the impact of reinvesting the dividends and excluding them when computing the wealth index. Comment on both, month-end prices as well as the yearly growth rate. (7 marks) An asset manager is asked to show the performance of his investing strategy by creating a wealth index. This index should include capital gain and dividend payments during the investment horizon of one calendar year to capture the overall growth impact of his/her investment strategy to showcase performance of the investing strategy to a potential client - a large pension fund. You are required assist the investment manager in developing this index. You have following information available with you Capital gains and dividends received during the year 2020 are provided in table 2. Table 2 capital gains and dividends in 2020 Month Jan-2020 Feb-2020 Mar-2020 Apr-2020 May-2020 Jun-2020 Jul-2020 Aug-2020 Sep-2020 Oct-2020 Nov-2020 Dec-2020 Capital gains £5 -£3 -£5 -£10 £7 £11 -£3 £8 £1 -£4 -£2 £3 Dividends 0 0 £2.5 0 0 £1.5 0 0 £1 0 0 £2 Required: a) Find the ending price for each month for data provided in table 2. Create the price series if a representative investor has allocated an initial capital of £100 (in Dec-2019). (10 marks) b) Can this monthly price series be used as a wealth index? Comment. (3 marks) c) What is the growth rate of this price series index on yearly basis? (5 marks) d) Using calculations, evaluate the impact of reinvesting the dividends and excluding them when computing the wealth index. Comment on both, month-end prices as well as the yearly growth rate. (7 marks)
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Answer rating: 100% (QA)
a To calculate the ending price for each month we need to track the cumulative capital gains and dividends throughout the year Lets start with an initial capital of 100 in December 2019 and calculate ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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