Jamie Peters invested $100,000 to set up the following portfolio 1 year ago. a.

Question

Jamie Peters invested $100,000 to set up the following portfolio 1 year ago.

a. Calculate the portfolio beta on the basis of the original cost figures (please show how)
b. Calculate the percentage return of each asset in the portfolio for the year.
c. Calculate the percentage return of the portfolio on the basis of original cost, using income and gains during the year.

Asset Cost Beta at purchase Yearly income Value today A $20,000 0.80 $1,600 $20,000 B 35,000 0.95 1,400 36,000 C 30,000 1.50 --- 34,500 D 15,000 1.25 375 16,500

Explanation / Answer

Calculate the portfolio beta on the basis of the original cost figures

Asset

Cost

Weight

Beta

Weighted Beta

A

20000.00

0.20

0.80

0.16

B

35000.00

0.35

0.95

0.33

C

30000.00

0.30

1.50

0.45

D

15000.00

0.15

1.25

0.19

100000.00

1.13

Portfolio Beta

1.13

percentage return of each asset in the portfolio for the year

Asset

Cost

Yearly income

Value today

Return From Investment

% return

A

20000.00

1600

20000

1600.00

8.00

B

35000.00

1400

36000

2400.00

6.86

C

30000.00

0

34500

4500.00

15.00

D

15000.00

375

16500

1875.00

12.50

100000.00

3375

107000

10375.00

Return From Investment     =

Value today-Cost Of asset + Yearly income

the percentage return of the portfolio on the basis of original cost, using income and gains during the year

Return of porfolio = (Total of Value today-Total of Cost Of asset + Yearly income )/Total of Cost Of asset

(107000-100000+3375)/100000 =10.375 %

percentage return of the portfolio on the basis of original cost, using income and gains during the year 10.375%

10..375 %

Calculate the portfolio beta on the basis of the original cost figures

Asset

Cost

Weight

Beta

Weighted Beta

A

20000.00

0.20

0.80

0.16

B

35000.00

0.35

0.95

0.33

C

30000.00

0.30

1.50

0.45

D

15000.00

0.15

1.25

0.19

100000.00

1.13

Portfolio Beta

1.13

percentage return of each asset in the portfolio for the year

Asset

Cost

Yearly income

Value today

Return From Investment

% return

A

20000.00

1600

20000

1600.00

8.00

B

35000.00

1400

36000

2400.00

6.86

C

30000.00

0

34500

4500.00

15.00

D

15000.00

375

16500

1875.00

12.50

100000.00

3375

107000

10375.00

Return From Investment     =

Value today-Cost Of asset + Yearly income

the percentage return of the portfolio on the basis of original cost, using income and gains during the year

Return of porfolio = (Total of Value today-Total of Cost Of asset + Yearly income )/Total of Cost Of asset

(107000-100000+3375)/100000 =10.375 %

percentage return of the portfolio on the basis of original cost, using income and gains during the year 10.375%

10..375 %

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