RMIT Classification: Trusted

Take-home Assignment (Semester 3, 2024)

Course Name: Equity Investment & Portfolio Management

Due: see Canvas

INSTRUCTIONS:

This assessment is an individual take-home assignment which will contribute 10% towards your
final assessment.

You must abide to the honour code and do this assessment independently and by yourself
without consulting your lecturers and others and submit your work within the time limit allowed.

The assignment contains a data sheet (in MS Excel format) in a separate file uploaded in Canvas
and questions which follow in the next page. Questions should be answered based on the data
given. Wrong data selection will result in a deduction of 30% of the total given mark. An
attempt to use any tricks to reduce word count or gain academic advantages is considered
academic misconduct.

Both the MS Word document and Excel file submitted via Turnitin in Canvas for final
answers are graded. The Excel file should have clear calculation steps to let instructors verify
the numerical answers. You MUST name your file using your RMIT Student ID, First name and
Last name (e.g. s1234567_Huy_Doan).

You must add a cover page to the MS Word document with your name, student ID and word
count only for Question 4.

Your MS Word document should be formatted appropriately. (A4 page size, Font Style – Times
New Roman, Font Size – Headings 14 and body 12, Line spacing 1.5, Standard Margins).

The word limit in the MS Word document is 1,200 words +10% (excluding references, tables
and figures), and this should be written on the cover page. For every 100 words in excess, you
will receive a deduction of 0.5 marks. Please note that tables and figures should only be used for
supplementary to the main discussions. The inclusion of main discussions in tables and figures or
similar means is strictly prohibited, and if caught, the words will be counted towards the final
word count.

You need to format the reference list and add in-text citations where relevant. Information
without citations will be considered plagiarism.

1
 RMIT Classification: Trusted

You are a fresh investment analyst of a global asset management company with a subsidiary in
Vietnam. You company plans to offer investment products in different asset classes to meet the
client needs. You are required to make an investment report about two asset classes as
follows:
- If the last digit of your student ID is 0 or 1: US equity (through SPDR S&P500 ETF
Trust SPY) and real estate (through Vanguard Real Estate Index Fund ETF VNQ). Your
client risk tolerance is 18%.
- If the last digit of your student ID is 2 or 3: US equity (through SPDR S&P500 ETF
Trust SPY) and gold (through SPDR Gold Shares GLD). Your client risk tolerance is
14%.
- If the last digit of your student ID is 4 or 5: US equity (through SPDR S&P500 ETF
Trust SPY) and crude oil (through United States Oil Fund LP). Your client risk tolerance
is 20%.
- If the last digit of your student ID is 6 or 7: US equity (through SPDR S&P500 ETF
Trust SPY) and bonds (through iShares Core US Aggregate Bond ETF AGG). Your
client risk tolerance is 16%.
- If the last digit of your student ID is 8 or 9: US equity (through SPDR S&P500 ETF
Trust SPY) and cryptocurrency (through Grayscale Bitcoin Trust GBTC). Your client
risk tolerance is 28%.

The latest risk-free rate is available from the US 1-month Treasury Bill at 4.635%.
Your report should have four separate parts that answer the four questions below, with
questions 1 to 3 presented in an Excel file and question 4 presented in the Word file.

Question 1 (0.5 mark): You want to make a forecast of future performance of the assigned asset
classes, and history serves as a benchmark. Based on the historical returns data over the latest 60
months in Excel file, select the asset classes assigned to you and estimate the expected returns
and risk (standard deviation) of the individual assigned asset classes. Also estimate their
correlation.

To prepare for Question 2 and 3, you must convert the monthly expected returns and risk (not
correlation) in Question 1 answers to the annual numbers as follows:
Annual expected returns = monthly expected returns x 12
Annual standard deviation = monthly standard deviation x square root of 12
The annual expected returns, annual standard deviation, and correlations are used as the inputs in
Question 2 and 3.

Question 2 (2 marks): Now suppose you want to provide client with the visualization effect of
their asset allocation in terms of both return and risk.
a. Change the weights into each of the above assets from -100% to 200% with increment of 5%
to obtain the possible portfolios. Present them in a table and visualize them in a graph with the x-
axis as the portfolio standard deviation and the y-axis as the expected portfolio return. (0.5
mark)

2
 RMIT Classification: Trusted

b. Assuming short-selling constraints, find out the portfolio details (composition and risk) with a
minimum risk. Also find out the portfolio details (composition, risk and expected returns) with
the best return-risk relationship. If you use Solver, please show the evidence of the Solver setup
separately for each portfolio. (1.5 marks)

Question 3 (1 mark): Now you want to create the portfolio that combines the best return-risk
relationship portfolio found above with risk-free rate to create an even more efficient portfolio
for the client given her risk tolerance.
a. What is the composition in two asset classes and risk-free rate, expected return and risk
tolerance of her combined portfolio? (0.5 mark)

b. Now your client would like to see what happens if there was no risk-free rate. What would be
the client portfolio expected returns and portfolio composition given her risk tolerance in that
case, assuming short-sales constraints in two asset classes? If there is no answer, explain why.
(0.5 mark)

Question 4 (6.5 marks, maximum 1,200 words + 10% excluding of references, tables and
figures)
Although history may serve as a good start in Question 1 to 3, you want to incorporate latest
information in 2024 to support your client’s investment decision. As of now,
a. Based on your research conducted with information exclusively in 2024, evaluate the potential
risks in each asset class and recommend how you adjust the returns forecast and the client’s
portfolio composition in Question 3a. Please provide at least 4 references (such as academic
article, industry report, or news from a trustable source) in 2024. Note that it is
COMPULSORY to add the link and date at which the reference was available to public to
show this reference does really exist. For example, if you cite the WHO COVID-19 report that
was available to public in 13/8/2024 (see in the link), your reference should look like “WHO
COVID-19 report, https://www.who.int/publications/m/item/covid-19-epidemiological-update-
edition-170 , available to public 13/8/2024.” (2.5 marks)

b. Your client is interested in adding another asset class (can be outside those provided in
assessment) in her portfolio in Question 3a. Based on information exclusively in 2024,
recommend which asset class to be added. To do this, you might want to look at its potential
risk/benefits and how it contributes to the risk and expected returns of current portfolio. Please
provide at least 4 references (such as academic article, industry report, or news from a trustable
source) in 2024. Note that it is COMPULSORY to add the link and date at which the
reference was available to public to show this reference does really exist. (2.5 marks)

c. Your client wants to know what asset class (can be outside those provided in assessment) she
must avoid investing in her portfolio in Question 3a. Based on information exclusively in 2024,
recommend which asset class to avoid and why. Give a real-time example in 2024 to support
your recommendation. Please also provide at least 4 references (such as academic article,
industry report, or news from a trustable source) in 2024. Note that it is COMPULSORY to
add the date at which the reference was available to public to show this reference does
really exist. (1.5 marks)

3
 RMIT Classification: Trusted

IMPORTANT NOTE: Please organize and present your work in an elegant way. Up to 10% of
total mark is penalized to poor organization and presentation of answers on Word and calculation
steps in Excel (e.g. correct label and title, consistent decimal points, % when relevant, consistent
reference list, etc.)