Question: Students should read the Harvard Business School case study entitled 'Investments: Delineating an Efficient Portfolio' and answer the following questions. Students should note that the

Students should read the Harvard Business School case study entitled 'Investments: Delineating an Efficient Portfolio' and answer the following questions. Students should note that the risk of the portfolio should not be more than 10% per year. Students should use the dataset in the Stock Spreadsheet for their calculations.

Key contextual elements should include risk diversification, portfolio theory, efficient frontier, Sharpe ratio, correlation analysis, risk and return.

General instructions:

o Make a two-asset portfolio and examine how risk is diversified.

o Make an efficient multiple-asset portfolio.

o Make an efficient multiple-asset portfolio and analyze the effect of adding a risk-free asset to a portfolio containing risky assets.

Examining Risk and Return Characteristics of a Two Asset Portfolio Profile of

Individual Assets Asset Portfolio # 1 NI 2 Correltion coefficient of returns

between the assets = HHLAS5E 1 10 11 Expected Return Risk 15%

30% Weights 10% 15% Asset 1 100% 90% 80% 70% 60% 50%

40% 30% 20% 10% 0% Portfolio Standard Expected Asset 2 Deviation Return

0% 10,00% 15,00% 10% 10,50% 16,50% 20% 11,00% 18,00% 30% 11,50% 19,50%

40% 12,00% 21,00% 50% 12,50% 22,50% 60% 13,00% 24,00% 70% 13,50% 25,50%

80% 14,00% 27,00% 90% 14,50% 28,50% 100% 15,00% 30,00%

For the exclusive use of G. latridis, 2016. Ivey Publishing W14232 INVESTMENTS: DELINEATING AN EFFICIENT PORTFOLIO Upasana Mi

For the exclusive use of G. latridis, 2016. Page 2 9B14N012 SELECTION OF FUNDS Fund performance reports were widely available

For the exclusive use of G. latridis, 2016. Page 3 9B14N012 where V, is the value of a portfolio at the time t, and r: is sim

For the exclusive use of G. latridis, 2016. Page 4 9B14N012 and Op = wo} + wžož +291,6, W20,102 Correlation 1,2 is a measure

For the exclusive use of G. latridis, 2016. Page 5 9B14N012 where SR, is the Sharpe Ratio of the portfolio, 7, is expected re

For the exclusive use of G. latridis, 2016. Page 6 9B14N012 EXHIBIT 1: SHARMAS SELECTED MUTUAL FUNDS Quarterly Fund # Mutual

For the exclusive use of G. latridis, 2016. Page 7 9B14N012 EXHIBIT 3: RISK-RETURN PROFILE OF THE PORTFOLIOS CONSIDERED BY SH

Examining Risk and Return Characteristics of a Two Asset Portfolio Profile of Individual Assets Asset Portfolio # 1 NI 2 Correltion coefficient of returns between the assets = HHLAS5E 1 10 11 Expected Return Risk 15% 30% Weights 10% 15% Asset 1 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Portfolio Standard Expected Asset 2 Deviation Return 0% 10,00% 15,00% 10% 10,50% 16,50% 20% 11,00% 18,00% 30% 11,50% 19,50% 40% 12,00% 21,00% 50% 12,50% 22,50% 60% 13,00% 24,00% 70% 13,50% 25,50% 80% 14,00% 27,00% 90% 14,50% 28,50% 100% 15,00% 30,00%

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