Mr. Yamcie Oliva considers investing his PHP 100,000 wealth into two assets: SM Prime Holdings Inc. (SMPH) and Jollibee Foods Corp. His friend, Ms. Julie-Anne Ilquin, a financial analyst who works at JD Morguens, suggests partitioning his wealth by investing 70% of it in the stock that has a higher average daily rate of return, and the remaining 30% be invested in the other asset. Mr. Oliva has the following data points of the historical prices for day x=0,1,2, ..., 8, HP, of SMPH and JFC: Dayx SMPH 0 36.4 1 2 3 4 5 6 7 8 9 JFC 245.2 245.8 249.2 249 245 244.6 248 35.5 36 35.95 35.9 36.85 37.5 37.05 245.4 243.8 245 36.6 36.9 a. Mr. Oliva wishes to calculate the daily rate of return R(x) for days x= 1,2,...,9 using the following formula: R(x)= HP-HP-1 HP-1 Generate a table showing the daliy rate of return for both assets. b. It is known that the average daily rate of return can be calculated by solving the following definite integral: R(x)dx, where a is the maximum number of days you observed the historical prices. Use Romberg integration to approximate the average daily rate of return separately for both assets as accurately as possible. c. To which stock should the 70% of wealth be allocated?
Mr. Yamcie Oliva considers investing his PHP 100,000 wealth into two assets: SM Prime Holdings Inc. (SMPH) and Jollibee Foods Corp. His friend, Ms. Julie-Anne Ilquin, a financial analyst who works at JD Morguens, suggests partitioning his wealth by investing 70% of it in the stock that has a higher average daily rate of return, and the remaining 30% be invested in the other asset. Mr. Oliva has the following data points of the historical prices for day x=0,1,2, ..., 8, HP, of SMPH and JFC: Dayx SMPH 0 36.4 1 2 3 4 5 6 7 8 9 JFC 245.2 245.8 249.2 249 245 244.6 248 35.5 36 35.95 35.9 36.85 37.5 37.05 245.4 243.8 245 36.6 36.9 a. Mr. Oliva wishes to calculate the daily rate of return R(x) for days x= 1,2,...,9 using the following formula: R(x)= HP-HP-1 HP-1 Generate a table showing the daliy rate of return for both assets. b. It is known that the average daily rate of return can be calculated by solving the following definite integral: R(x)dx, where a is the maximum number of days you observed the historical prices. Use Romberg integration to approximate the average daily rate of return separately for both assets as accurately as possible. c. To which stock should the 70% of wealth be allocated?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:Mr. Yamcie Oliva considers investing his PHP 100,000 wealth into two assets: SM Prime
Holdings Inc. (SMPH) and Jollibee Foods Corp. His friend, Ms. Julie-Anne Ilquin, a
financial analyst who works at JD Morguens, suggests partitioning his wealth by investing
70% of it in the stock that has a higher average daily rate of return, and the remaining 30%
be invested in the other asset. Mr. Oliva has the following data points of the historical prices
for day x= 0, 1,2, ..., 8, HP,, of SMPH and JFC:
SMPH| JFC
36.4
245.2
Day x
35.5
245.8
36
249.2
35.95
249
4
35.9
245
36.85
244.6
37.5
248
37.05
245.4
36.6
243.8
9.
36.9
245
a. Mr. Oliva wishes to calculate the daily rate of return R(x) for days x = 1,2, ..,9 using
the following formula:
HP, – HP,-1
R(x) :
HPx-1
Generate a table showing the daliy rate of return for both assets.
b. It is known that the average daily rate of return can be calculated by solving the
following definite integral:
R(x)dx,
where a is the maximum number of days you observed the historical prices. Use
Romberg integration to approximate the average daily rate of return separately for both
assets as accurately as possible.
c. To which stock should the 70% of wealth be allocated?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 3 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education