INTI INTERNATIONAL UNIVERSITY

BACHELOR OF BUSINESS (HONS) FINANCE

FIN 4246 PORTFOLIO MANAGEMENT

JANUARY SESSION 2016

INDIVIDUAL ASSIGNMENT (20%)

Assessment for Individual Assignment:
1.

Please refer and implement the format guideline below for this assignment:

2.

Use A4 size paper, each page of your essay should be printed single sided.
All referenced research/ phrases must be well documented in references.

For the cover page, include the below phrase in italic font size 10:
"I declare that this assignment is my own work entirely and suitable acknowledgement has
been made for any sources of information used in preparing it."

Additional Information for Individual Assignment:

1.

2.
3.

Written work will be graded in accordance with the marking scheme below and using the
following criteria:

The degree of originality evidence in the work.

The extent to which the questions have been correctly interpreted and answered.

Demonstrated understanding of the main concepts of the questions.

Penalties will apply to all late work.
Plagiarism may result in a FAIL grade being recorded.

INTI INTERNATIONAL UNIVERSITY

BACHELOR OF BUSINESS (HONS) FINANCE
FIN 4246 PORTFOLIO MANAGEMENT
JANUARY SESSION 2016
Please take note of the following:
1. Due date: to be confirmed.
2. Top, bottom, left and right margin 1
3. Font Times New Roman, size 12 and single line spacing
4. Length: maximum 8 pages and must be electronically prepared.
Assume that you are the manager of a passive portfolio and your benchmark is the Kuala Lumpur
Composite Index (KLCI). KLCI consists of 30 stocks. Due to the limited amount of funds, you intend to
choose only 4 out of 30 stocks.
Retrieve their MONTHLY STOCK PRICES at the end of each month from DataStream over the period
from 31 Dec 2010 to 31 Dec 2013. Extract also the corresponding MONTHLY CLOSING VALUES of
the Kuala Lumpur Composite Index (KLCI) over the same time period.
Register
your
FOUR
(4)
stocks
via
Google
link
below
https://docs.google.com/spreadsheets/d/1Urapbminn5zWWQYhFKUMq3cMmmJOwNnoHNsVaNxgs1s/
edit?usp=sharing (either A. 1 out of 4 stocks must not be chosen by other students in the class or B. the
combination of your four stocks must be different from others).

Provide the working process which illustrates how you get the answers. Only one example
for each question is required.
Do not exceed the page limit. The extra page might not be marked.
Submit on time. Discount 20% of marks for one-day late submission, 50% of marks for
two-day late submission and the assignment will not be marked for more than two-day late
submission.
Answer your questions accordingly to the marking scheme and the assignment will be
marked as what the marking scheme requires.
Provide your answers for each question and do not combine the questions.
5 marks will be deducted if marking scheme is not attached.

Required:
1.
Market value weighting method is the most common weighting method used
in computing a market index. You are interested in finding out how the
number of stocks in a portfolio will affect its performance. Therefore, you
form the following three portfolios:
Portfolio
Number of stocks in the portfolio
A
Any 2 out of 4 stocks
B
Any 3 out of 4 stocks
C
All 4 stocks
Calculate the monthly rate of return of your passive portfolios, including
Portfolio A, B, and C, over the period above using the market value weighting
method.
2

(25 marks)
2.

If the KLCI is your benchmark, calculate the tracking errors of Portfolio A, B and C in Question
1. Study how the number of stocks in a portfolio affects the tracking errors and compare these
three portfolios (A, B, and C) with the benchmark by drawing a proper diagram.
(25 marks)

3.

Re-do Question 1 and 2 using the price weighting method.

(20 marks)

4.

Your next task is to calculate the minimum variance portfolio and the efficient frontier of risky
portfolios which consists of FOUR stocks chosen by you. To do this you are encouraged to make
use of the Solver tool in MS Excel.
Plot the minimum variance portfolio and the efficient frontier of risky portfolios, along with the
individual stocks, the market index and the equal weighted portfolio on a graph.
What do you observe? Explain using concepts you have learnt in the course.
(30 marks)

THE END

FIN 4246 PORTFOLIO MANAGEMENT

JANUARY SESSION 2016
The marking scheme for the Individual Assignment
(attach the following marking scheme to your assignment as Page 2,
after your cover page)
Marks
Marks
Expected Answers
allocated
25%

1.

Calculation of the monthly rate of return using the market

value weighting method [15 marks] + Explanation and
presentation [10 marks]

2.

Calculation of the tracking errors [10 marks] + Explanation

and presentation [15 marks]

25%

3.

Calculation of the monthly rate of return and tracking errors

using the price weighting method [10 marks] + Explanation
and presentation [10 marks]

20%

4.

Minimum variance portfolio and efficient frontier of risky

portfolios which consists of four stocks [15 marks]* + the
proper diagram(s) [5 marks] + Your observation, explanation
and presentation [10 marks]

30%

Total =

100%

awarded

* Send the excel file which only show the calculation of the minimum variance portfolio and
efficient frontier of risk portfolios. You are still required to provide the explanation on how to
calculate the minimum variance portfolio and efficient frontier in your assignment. The proper excel
file is required [5 marks out of 15 marks allocated]