Question

You are the portfolio manager of a boutique equity fund with $15 million to invest. The risk-free rate is 5% and your fund can borrow and lend at the risk-free rate. Your research analyst finds that the investable equity market index against which your fund is benchmarked has an expected return of 10% and standard deviation of 18%. He suggests that you invest 100% of the funds in the equity of JMP Ltd, which claims to be “a technology company that just happens to do banking” with an expected return of 12% and standard deviation of 40%.

Required:

(a) If feasible, construct an efficient portfolio that has the same expected return as JMP Ltd. How many dollars should be invested in each asset to construct such a portfolio?

(b) Calculate the standard deviation of the portfolio constructed in part (a).

(c) If feasible, construct an efficient portfolio that has the same standard deviation as JMP Ltd. How many dollars should be invested in each asset to construct such a portfolio?

(d) What is the expected return of the portfolio constructed in part (c)?

(e) Based on your findings from the earlier parts, would you recommend investing 100% of the funds in JMP Ltd? Explain your recommendation​

Answer 1

Answer:

ost of sales   (3,131,233) (5,480,247)

Gross profit (341,125) 2,658,123

Depreciation 448,359 450,377

Administration and general expenses 2,233,102 1,958,420

Operating (loss)/ profit (3,022,586) 249,326

Finance Charges 320,554 270,083

Other income 39,159 25,632

(Loss) / profit before taxation (3,303,981) 4,875

Taxation - 731

Net (loss)/ profit) for the period. (3,303,981) 4,144

Net (loss) / profit margin % (118.4) 0.1

1\ Calculate the change in Income, Expenses, and Profit /Loss in 2020 with respect to 2019

2\Estimate the Income and Expenses for 2021

3\Budgeted Income Statement for 2021

*take your time in solution , and doing the best of you