Marketable Securities – NBC Institute

FM – Nov 2021 – L3 – Q6 – Portfolio Management

Analyze the risk profile of Bettaluck plc's short-term equity portfolio and assess investment adjustments based on market returns and financial strategy.

Question

Bettaluck plc is experiencing a substantial net cash inflow, which has been temporarily invested in a short-term equity portfolio. This portfolio consists of investments in four Nigerian listed companies. The funds are intended to meet tax obligations, dividend payments, and future capital expenditures in several months.

Portfolio Details:

Required:

a. Based on the data provided, calculate the risk (i.e., Beta) of Bettaluck’s short-term investment portfolio relative to the market. (4 Marks)

b. Recommend whether the composition of Bettaluck’s short-term investment portfolio should be adjusted. Provide reasons for your recommendation, including relevant calculations. (6 Marks)

c. Discuss the factors a financial manager should consider when investing in marketable securities. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Gains, Dividend Yield, Financial management, Investment Portfolio, Market Return, Marketable Securities, Portfolio Beta, Risk Assessment, Short-Term Strategy, Treasury bills
Level: Level 3

Topic: Portfolio Management

FM – May 2018 – L3 – SB – Q4 – Portfolio Management

Analyze SF Plc.'s portfolio beta and assess whether the short-term investment strategy is optimal.

Question

Sunmola Funds (SF) Plc. has a portfolio of short-term investments in the shares of four quoted companies.

Company	Holding
Tomiwa (T)	100,000 shares
Pascal (P)	155,000 shares
Binta (B)	260,000 shares
Yetunde (Y)	420,000 shares

You have the following additional information:

Company	Beta	Market Value Per Share (Kobo)	Expected Total Return on Investment p.a (%)
T	1.55	280	21.0
P	0.65	340	12.5
B	1.26	150	18.0
Y	1.14	9.5	18.5

The market risk premium is 10% per year, and the risk-free rate is 6% per year.

Required:

a. Estimate the Beta of SF Plc.’s short-term investment portfolio. (4 Marks)

b. Recommend, giving your reasons, whether the composition of SF Plc.’s short-term investment portfolio should be changed using relevant calculations. (10 Marks)
Hint: Consider the alpha values of the shares and the propriety of investing short-term funds in equity.

c. Explain THREE factors that a financial manager should take into account when investing in marketable securities. (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Beta calculation, Investment Decision, Marketable Securities, Portfolio analysis, Risk-Return Analysis
Level: Level 3

Topic: Portfolio Management
Series: MAY 2018

FM – Nov 2021 – L3 – Q6 – Portfolio Management

Analyze the risk profile of Bettaluck plc's short-term equity portfolio and assess investment adjustments based on market returns and financial strategy.

Question

Portfolio Details:

Required:

a. Based on the data provided, calculate the risk (i.e., Beta) of Bettaluck’s short-term investment portfolio relative to the market. (4 Marks)

b. Recommend whether the composition of Bettaluck’s short-term investment portfolio should be adjusted. Provide reasons for your recommendation, including relevant calculations. (6 Marks)

c. Discuss the factors a financial manager should consider when investing in marketable securities. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Gains, Dividend Yield, Financial management, Investment Portfolio, Market Return, Marketable Securities, Portfolio Beta, Risk Assessment, Short-Term Strategy, Treasury bills
Level: Level 3

Topic: Portfolio Management

FM – May 2018 – L3 – SB – Q4 – Portfolio Management

Analyze SF Plc.'s portfolio beta and assess whether the short-term investment strategy is optimal.

Question

Sunmola Funds (SF) Plc. has a portfolio of short-term investments in the shares of four quoted companies.

Company	Holding
Tomiwa (T)	100,000 shares
Pascal (P)	155,000 shares
Binta (B)	260,000 shares
Yetunde (Y)	420,000 shares

You have the following additional information:

Company	Beta	Market Value Per Share (Kobo)	Expected Total Return on Investment p.a (%)
T	1.55	280	21.0
P	0.65	340	12.5
B	1.26	150	18.0
Y	1.14	9.5	18.5

The market risk premium is 10% per year, and the risk-free rate is 6% per year.

Required:

a. Estimate the Beta of SF Plc.’s short-term investment portfolio. (4 Marks)

c. Explain THREE factors that a financial manager should take into account when investing in marketable securities. (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Beta calculation, Investment Decision, Marketable Securities, Portfolio analysis, Risk-Return Analysis
Level: Level 3

Topic: Portfolio Management
Series: MAY 2018

Question Tag: Marketable Securities

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FM – Nov 2021 – L3 – Q6 – Portfolio Management

Analyze the risk profile of Bettaluck plc's short-term equity portfolio and assess investment adjustments based on market returns and financial strategy.

Required:

FM – May 2018 – L3 – SB – Q4 – Portfolio Management

Analyze SF Plc.'s portfolio beta and assess whether the short-term investment strategy is optimal.

FM – Nov 2021 – L3 – Q6 – Portfolio Management

Analyze the risk profile of Bettaluck plc's short-term equity portfolio and assess investment adjustments based on market returns and financial strategy.

Required:

FM – May 2018 – L3 – SB – Q4 – Portfolio Management

Analyze SF Plc.'s portfolio beta and assess whether the short-term investment strategy is optimal.

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FM – Nov 2021 – L3 – Q6 – Portfolio Management

Analyze the risk profile of Bettaluck plc's short-term equity portfolio and assess investment adjustments based on market returns and financial strategy.

Required:

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FM – May 2018 – L3 – SB – Q4 – Portfolio Management

Analyze SF Plc.'s portfolio beta and assess whether the short-term investment strategy is optimal.

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FM – Nov 2021 – L3 – Q6 – Portfolio Management

Analyze the risk profile of Bettaluck plc's short-term equity portfolio and assess investment adjustments based on market returns and financial strategy.

Required:

You're reporting an error for "FM – Nov 2021 – L3 – Q6 – Portfolio Management"

FM – May 2018 – L3 – SB – Q4 – Portfolio Management

Analyze SF Plc.'s portfolio beta and assess whether the short-term investment strategy is optimal.

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