Critically discuss Portfolio Theory and the CAPM. The discussion should include assumptions and shortcomings of the model and possible alternatives.
6FNCE009W International Investments
Project weight: 75% of module mark
- This assessment must be prepared and submitted individually.
- The project should be produced in Word. It should be submitted electronically through Blackboard and will be checked via Turnitin for plagiarism.
- The rules on late submission and plagiarism are applied and fully enforced by the School: Section 10: Academic misconduct (westminster.ac.uk)
- The word limit is 2,000 words (+10%) excluding cover page, table of content, executive summary, and appendices.
You are required to:
- Critically discuss Portfolio Theory and the CAPM. The discussion should include assumptions and shortcomings of the model and possible alternatives. (20 marks)
- Select a company ensuring it issues Equity, Bonds and Options and that is listed on the FTSE100. Present a short summary of its business, with focus on its financial profitability ratios and strategy for future growth. You could for example show the company’s EPS growth over the last 5 years and compare their EPS and P/E with similar companies or the industry average. Is the company diversified? What are their risk levels as measured by their beta. To gain a good mark in this section you need to read as much as possible about the company, including their latest annual report and any news/reports from reliable sources. Your analysis needs to be from the perspective of an investor. Please include graphs/tables (clearly labelled with data source) as visual aids.(20 marks)
- Identify and show the securities issued by the company (equity, bonds, derivatives), show whether bond or equity have been more profitable in the last 6 months and make recommendations as to which securities you would invest in as a Fund Manager for a Mutual Fund based in UK. Clearly explain your choice. Value the option with a Black and Sholes model and compare with the market value (15 marks)
- Critically discuss different equity valuation methods and identify the most appropriate method for your chosen company. By collecting relevant financial data from reliable sources (Bloomberg terminals, DataStream, annual reports, FT, etc.) estimate a price for the company’s shares and compare it to the actual market price. Clearly explain any assumptions made when applying your chosen valuation technique. Make sure to include all workings in an Appendix. (35 marks)
- Present your report in a suitable format: Include a cover page (with module title and code, assignment title and word count), page numbers, table of content, executive summary, explicit headings. A reference list is optional and only if you reference/quote external sources (e.g. academic/ newspaper articles, textbooks). The report should be clearly written in academic English, the use of any business/scientific jargon clearly explained. Formatting Guidelines: font size 12, text alignment: justify, line spacing: 1.5. (10 marks for presentation)
100% Plagiarism Free & Custom Written,
Tailored to your instructions