Weight: this assignment is out of a total mark of 100. It is worth 20% of your final grade1
Instructions




You will need to upload two files for your assignment. One is a Microsoft Word file
and the other a Microsoft Excel file. Upload these via Blackboard. A submission can
be made only once.
Please make sure you have your full name and student number on every page of your
Word document and on the first tab of the Excel file.
Your Word document should be typed in Times New Roman font, size 12. The
assignment should be double spaced and have margins of 2.54 cm.
Teaching staff will not answer any questions regarding the assignment as this gives
students an unfair advantage over others. However, you may post any questions to the
assignment discussion board on BlackBoard and they will be answered there.
Note that your assignment will be analysed for plagiarism using TurnItIn.
Background: Soon after graduating youfind yourself working as a junior call centre
employee at a leading international investment and consultancy firm – Exite Asset
Consulting. You are seeking to move into a more challenging role and progress your career.
A new position has recently been advertised looking for a junior researchanalyst in the R&D
department. Your Human Resources Department has identified you, and several of your work
colleagues, as potential candidates for the position. They have set a challenge to see if you are
able to demonstrate that you suitable and capable of performing to a standard required of the
position.The have requested that all ‘applicants’ must be able to demonstrate their ability to
utilise Excel within a financial setting; whilst demonstrating a sound understanding of the
theoretical underpinnings of the associated finance theory. If successful you will be hired for
the position, which includes the opportunity to travel to New York for 3 months for further
training, which will undoubtedly strengthen your skills and fast track your career.
Managementhave provided you with the following resources:


1
2
A pdf of an extract from an Excel finance text written by Mayes (Chapter 13)
detailing the required process with which they wish you to utilise whilst
attempting the assignment.2
An Excel file that contains the format and style with which to provide the
practical workings of your assignment. Please note this is not an “identical”
format as that provided in the Mayes chapter – but it is very close. They
require that you follow the format provided the in Excel file provided “FINM7403 Assignment 2015 Student.XLSM”.
Please see the course profile for further information
Source: Financial Analysis with Microsoft Excel, 2013 – Timothy Mayes.



Stocks returns for four stocks – NCM, BHP, ORG and QBE.
Instructions as the practical issues, processesand discussions required of the
assignment.
Some examples of the format and charts that they would like to see within the
final report.
Management have set the following assignment for the applicants. All applicants are asked to
provide a report that seeks to address and undertake the following:
Part 1)
a. Using the returns of the four stocks provided you must use Excel to build meanvariant efficient portfolios and determine the frontier of efficient investments.(8
Marks)
b. Provide a brief explanation (100 words max) as to what is the underlying theory and
process (i.e. assumptions, math etc.) that enables a mean-variant efficient portfolio
to be calculated and theoretically exist.3(8 Marks)
Part 2)
a. Continuing from above: Calculate and identify the Market portfolio. (8 Marks)
b. Provide a brief explanation (100 words max) as to what is the underlying theory and
process (i.e. assumptions, math etc.) that enables the Market Portfolio to be
calculated and why it theoretically exists.4(8 Marks)
c. Produce and briefly discuss (100 words max) the main features of the Figure
associated with what the data of a and b above demonstrate. An example would
look something like the figure below. (4 Marks)
Efficient Frontier with four stocks and the Market portfolio identified.
3
They require that you utilise and understand the formulas and process provided in the Mayes chapter.
4
ibid.
Part 3)
a. Continuing from above: Calculate the CML. (8 Marks)
b. Provide a brief explanation (150 words max) as to what is the underlying theory and
process (i.e. assumptions, math etc.) that enables the CML to be calculated and
theoretically exist.5(8 Marks)
c. Produce and briefly discuss (100 words max) the main features of the Figure
associated with what the data of a and b above demonstrate. An example would
look like the figure below. (4 Marks)
Efficient Frontier with four stocks and the Market portfolio and CML identified
Part 4)
a. Continuing from above: Calculate the optimal tangent indifference curve (using the
formula in the text and in the Excel spreadsheetprovided). Assume the investor has
a risk Aversion of 2.5. (8 Marks)
5
ibid
b. Provide a brief explanation (100 words max) as to what is the underlying theory and
process (i.e. assumptions, math etc.) that requires and enables the optimal tangent
indifference curve to be calculated and theoretically exist.6(8 Marks)
c. Produce and briefly discuss (100 words max) the main features of the Figure
associated with the data of a and b above demonstrates and combine that with the
CML and Market Portfolio undertaken above. An example would look like the
figure below. (4 Marks)
CML and Indifference Curve showing maximum Utility Portfolio
NB: You can easily ‘extend’ the CML such that it goes through the Max Utility point.
Part 5)
a. Continuing from above: Calculate the SML. (8 Marks)
b. Provide a brief explanation (100 words max) as to what is the underlying theory and
process (i.e. assumptions, math etc.) that enables the SML to be calculated and
theoretically exist.7(8 Marks)
c. Produce and briefly discuss (100 words max) the main features of the Figure
associated with the data of a and b above demonstrates. An example would look
like the figure below. (4 Marks)
SMLand CAPM
6
ibid
7
ibid
Part 6)
You need to present your report as per the format above and ensure that it is of a professional
standard and is of a quality that has been asked of you. Please supply the Excel file with the
associated calculations that accompany your report.(4 Marks)8
8
Please note: failure to provide the Excel file with your report will result in the assignment not being marked
until such time as it is provided. Late penalties will apply (see course profile).