Prepared for

Ms. Shakila Yasmin

Associate Professor
Course Instructor
F605: PM & Investment Analysis
IBA,University of Dhaka

Assignment Task:

Choose two Risky Asset from Market (Not perfectly positive co-related). Find Historical return of this two asset
from the month end closing price of last two years. Find E(r), SDV, co-relation coefficient, portfolio return and
portfolio risk, draw graph, print, put risk free rate and get optimum risky portfolio.

Then measure return and risk from the graph

Measure Risk aversion co-efficient, A of Investor and record return of Risk-free Asset

And finally, using risk aversion coefficient find investor risk and return.

Assignment Description:

We are going to propose a portfolio of 2 risky and 1 risk-free asset for Mr. Nasiruzaman. His expected return of
the investor is 20% and risk is 15%.

Considering the investment criteria of our investor we have chosen risky asset like IPDC and Padma Oil
company ltd. And for risk free assent Savings certificate is chosen.

Step1: We have collected month end price of the two risky assets for two years from archive of Dhaka Stock
Exchange (http://www.dsebd.org/data_archive.php) to calculate the returns.

The calculation table is presented on the next page.

Prepared by
Palash Kundu
May 5, 2018. EMBA 26th, Roll: ZR1603016
Prepared for
Ms. Shakila Yasmin
Associate Professor
Course Instructor
F605: PM & Investment Analysis
IBA,University of Dhaka

Table 1:

Step 2:

Risk and return of the portfolio using the annual risk and return for different weights (with 0.1
difference) have been calculated in table 2.

Prepared by
Palash Kundu
May 5, 2018. EMBA 26th, Roll: ZR1603016
Prepared for
Ms. Shakila Yasmin
Associate Professor
Course Instructor
F605: PM & Investment Analysis
IBA,University of Dhaka

Table 2:

Step 3:

Now we have plotted this to get the rp vs σp graph.

Figure 1: Optimal Capital Allocation Line (CAL) using two risky assets

From this graph: at the tangent of CAL line the risky portfolio expected return is 22% and portfolio risk 28%
Prepared by
Palash Kundu
May 5, 2018. EMBA 26th, Roll: ZR1603016
Prepared for
Ms. Shakila Yasmin
Associate Professor
Course Instructor
F605: PM & Investment Analysis
IBA,University of Dhaka

Step 4: Now we calculate the risk aversion co-efficient (A) and price of risk (y)

SD E(rp) Rf Risk Variance Price-Risk

Premium
Portfolio 28% 22% 12.00% 10.00% 0.0784 1.275510204
Investor preference 15% 20% 12.00% 8.0000% 0.0225 A=3.555555556

y 0.358737245

So from graph, we get the return and risk of two risky and one risk free asset which is 17.2% and 18%
respectively.

Figure 2: Optimal Capital Allocation Line (CAL) using two risky and one risk free asset.

Prepared by
Palash Kundu
May 5, 2018. EMBA 26th, Roll: ZR1603016