Question

# Q2a. Compute the monthly returns for the All Ordinaries (Rm), Cochlear Limited (RCOH) and ANZ (RANZ) using the following formula R₂ = 100 × (-1). Compute a monthly 30-day bank accepted

bill rate as follows: Ryf = Rannual 12 (1.5 marks). Q2b. Compute E(R), o, CV and sharp ratio for all three-return series over the 01/02/2005 - 1/12/2021 time period. Comment on all computed quantities in regard to the risk return trade-off using CV and sharp ratio. Which risk return trade-off would you prefer and why? (4 marks) Q2c. Compute excess returns from 01/02/2005 to 01/12/2021 for the market, i.e., market risk premium as R = Rm - Ryf, where Rm is the return on the All Ords computed in question 2a, and Ryf represents the monthly return on the 30-day bank accepted bill rate. Also compute excess return for each ANZ and COH as follows RANZ = RANZ - Ryf and ROH = RCOH - Ryf. (1.5 marks) Q2d. Plot the excess returns of each company against All Ords market index in two different scatter plots with best fitted line and equation. (3 marks)

Fig: 1