Assessment Type: Case Study – individual assessment. 2,500
Purpose: To allow students to demonstrate an understanding of the various portfolio analysis techniques applicable to real world situations, enabling them to analyse the performance of selected shares and the overall portfolio against a market benchmark. Students will also be required to communicate their findings in a written report. The assessment will reflect the advice that would be expected from students when, after graduation, they are working in a modern accounting practice. This assessment relates to learning outcomes a, b, c and d.
Topic: Analysis of an Investment Portfolio and Recommendations for the Future.
At the end of 2009, on the advice of a friend, your uncle invested $600,000 in a portfolio of 3 shares –
$200,000 in BHP, $200,000 in CSL (Commonwealth Serum Laboratories) and $200,000 in WBC (Westpac). The share prices than, and at the end of each year since, are shown below.
| As at 31 December, | Share Prices ($.c) | ||
| Year | BHP | CSL | WBC |
| 2009 | 37.14 | 31.56 | 24.91 |
| 2010 | 39.27 | 36.30 | 22.21 |
| 2011 | 30.83 | 32.18 | 20.55 |
| 2012 | 31.21 | 53.79 | 25.58 |
| 2013 | 31.88 | 67.42 | 31.39 |
| 2014 | 25.39 | 86.36 | 32.42 |
| 2015 | 16.81 | 101.55 | 32.24 |
| 2016 | 24.38 | 97.16 | 32.15 |
| 2017 | 26.96 | 141.91 | 31.37 |
| 2018 | 31.32 | 181.08 | 24.95 |
| 2019 | 38.85 | 280.78 | 24.35 |
S & P ASX 200 End-of-year Values, 2009-2019
Following are the values of the S & P ASX 200 Share market Index at the close of business on the last business day of each year from 2009 to 2019.
End of year Index Value at Close of Business
2009 4,870.6
2010 4,745.2
2011 4,056.6
2012 4,648.9
2013 5,352.2
2014 5,411.0
2015 5,295.9
2016 5,665.8
2017 6,065.3
2018 5,646.4
2019 6,684.1
NOTES: 1. The ASX 200 reached and then exceeded 7,000 early in 2020.
2. At close of business today (12 May, 2020), the ASX 200 value was 5,403.0.
SOURCE: “My ASX Dashboard, “End of Month Values, 2002 – April, 2020”, ASX (website).
Accessed, 12 May, 2020.
Each year since 2009, your uncle received and spent the dividends received from these shares, and did not alter the portfolio over this period. In fact, he has little knowledge of shares and investments generally.
Now your uncle seeks your advice as to whether he should retain his existing shares, or sell some or all of his portfolio and buy shares in another company or companies, or switch to another asset class. Your
uncle is a widower with no children. He expects to live another 10 years, and you are his only beneficiary under his will.
You are required to track the annual performance of the value of the individual share investments, and of the overall portfolio, each year at 31 December, from 31 December, 2010 to 31 December, 3019.
Your brief requires you to submit a 2 parts report – first, to report on the annual and overall performance of each share investment, and of the portfolio, against the bench mark market index (as a benchmark, you may choose either the All Ordinaries Index or the ASX200 Index); and secondly, to make recommendations, supported by reasons, for any change in strategy going forward.
Task Details:
Part 1. You are required to prepare a schedule showing the value of each shareholding, and of your uncle’s overall investment portfolio at 31 December each year, from 2009 to 2019 inclusive. Include two extra columns in the schedule, one is showing ASX200 and the second showing the calculated value of your uncle’ portfolio if instead he had invested the $600,000 in this Index.at 31 December, 2009.
Part 2. From the foregoing schedule, calculate the annual percentage returns (correct to 2 decimal places) of each share, the portfolio and the selected market Index for each year over the decade from 2010 to 2019 inclusive, and present in appropriate tables.
Further, calculate and present in tables, for the decade, the following:
- The arithmetic annual return and the geometric annual return for each share, the portfolio and the selected marketIndex.
- The standard deviation and the co-efficient of variation of each share, the portfolio and the marketIndex.
- The covariance of the average annual returns on each share with that of each of the other shares in the portfolio, i.e., the covariance of BHP with CSL, of BHP with WBC, and of CSL with WBC.
- The correlation coefficients of the average annual returns on each share with each of the other shares in the portfolio, i.e., the correlation coefficient of BHP with CSL, of BHP with WBC, & of CSL withWBC.
- The covariances and correlation coefficients of the average annual returns of the portfolio with those of the selected marketIndex.
- The Sharpe Index or ratio for each share, the portfolio and the market Index. Assume a risk- free rate of 4% p.a. operated over thedecade.
Part 3. Prepare a detailed report on the performance of your uncle’s portfolio, noting any over- or under- performance in relation to each share individual, and of the portfolio overall, all compared with the performance of the selected market Index (the benchmark) and note the reasons for these variations.
Your report should then extend to include (with reasons) recommendations as to whether, going forward for the next 10 years, you would make any changes to the portfolio now. (May, 2020). These recommendations would include which holdings you would increase, decrease, retain or replace, along with the identification of – and reasons for selecting – the recommended replacement investments. In making your recommendations, you may relax the requirement that 100% of the portfolio be invested fully and equally in 3 shares, and include other asset classes in your recommended investment mix (even zero amounts in shares, if desired). Minimum 10 References require, harvard style.
Marking Guide: Marks will be awarded as follows, out of 30 marks.
| Element | Marks |
| Research – extent and application | 30 |
| Analysis of the topic | 30 |
| Recommendations and Conclusion | 20 |
| Presentation | 20 |
| Total | 100 |
FIN201
Assessment 2 Marking Rubric: Individual 30%
Student’s Name ……………………………………………………………………………………………………………………………………………………………………….
Student’s No. …………………………………………………………………………………………………………………………………………………………………………
Question: Analysis of an Investment Portfolio.
Criteria | Fail (0 – 49%) | Pass (50 – 64%) | Credit (65 – 74%) | Distinction (75 – 84%) | High Distinction (85 – 100%) |
| Research –extent and application Value 30% Mark awarded | Poor research and / or inadequate or irrelevant references. Inaccurate calculation of the shares required to be purchased with the available funds. Incorrect formulae submitted for performance measures. | Minimum acceptable research sources and minimum acceptable level of relevant references. Correctly calculated the number of shares required to be purchased initially with the available funds. Limited identification of the correct formulae for the required performance measures. | Good identification of appropriate references. Correctly calculated the number of shares purchased initially with the available funds. Generally identified correct formulae for the performance measures but some incorrect choices noted. | Very good and varied selection of source references Initial portfolio correctly established and annual variations mostly correctly stipulated. Sound formulae identified for analysing share and portfolio performance. | Insightful and appropriate selection of varied references. Proper identification of the amount/ percentage of the total funds to be invested in each of the selected asset classes. Excellent selection and identification of formulae for analysing investment performance. |
| Analysis of the topic Value 30% Mark awarded | Did not set up initial share portfolio correctly; and / or Numerous errors in calculations of performance measures; & / or Significant gaps in knowledge of – and interpretation of – key performance measures and key risks. Too many reporting gaps | Simple and limited discussion of the initial portfolio and its growth. Limited understanding and explanation of the key performance calculations, with a number of calculation errors. Somewhat superficial treatment of key risks. Reporting was generally basic and lacked depth or breadth of discussion. | Identified and satisfactorily established the initial share portfolio and its subsequent growth Generally sound knowledge displayed of key performance calculations, but a few errors noted. Most key risks highlighted, along with satisfactory reporting. | Identified and clearly outlined the initial share portfolio and its ongoing growth. Correctly calculated and explained most performance measures. Key risks identified and good concise overall reporting | Identified and insightfully set up the initial portfolio; explained the rationale for the portfolio mix and its ongoing growth. Clearly understood the key performance measures, made correct calculations and submitted thorough analytical reporting. |
| Recommendations/ conclusions Value 20% Mark awarded | Few or no recommendations made to change the investment portfolio or to assess whether the need for change exists or to identify the investor’s goals. | Some recommendations made, but not based on the performance of the investment portfolio and/or on the investor’s needs, goals and preferences and /or the need for more diversification. | Good recommendations made on the future investment portfolio and on the risks associated with the recommendations. More required on need to meet investor’s goals | Very good recommendations made on the future investment portfolio and on the risks associated with the recommendations. | Excellent recommendations made on investment portfolio and on the risks associated with the recommendations. .Adequately linked to investor’s goals. |
| Presentation Value 20% Mark awarded | Referencing is absent / not systematic / incorrect. Graphs and tables are inaccurate/ absent/not referenced. | Acceptable presentation – obvious errors demonstrating lack of attention to detail. Basic or no graphs and tables. Some attempt at referencing, but obvious errors. | Good presentation overall but some obvious errors. Satisfactory graphs and tables. Referencing is mainly accurate. | Professional presentation – minor errors in some elements.. Good graphs and tables. Correct referencing throughout. | Highly professional presentation which satisfies all good presentation attributes. Excellent graphs and tables Correct referencing throughout. |
| Total Mark out of 100% | Comments: Signed by Marking Tutor:………………………………………………………….. Date: ………………………………………. | ||||
| Assessment Mark (to nearer whole number) / 30% | |||||
FIN201 INVESTMENT MANAGEMENT T120 24/02/2020 15:56 PAGE 11 OF 15
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