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Risk Return Analysis of a Stock and a Bond

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I have to analyze two securities, a stock and a bond: General Electric (GE) and the selected bond is Santa Rosa, California Wastewater Series A. For each security, I need to answer the following questions and support it with mathematical calculations. (at least 600 words).

Investment Portfolio Project: Risk/Return analysis
In preparation for your Risk/Return Analysis, complete the following activities:

a. Conduct a risk assessment and return analyses on the investment vehicles included in your investment portfolio.

b. Select the weights of each vehicle in your investment portfolio, (e.g., the percentage of the portfolio each vehicle will make up).

c. Locate the Beta for each security (use .3 Beta for bonds and 0 for money market instruments).

d. Calculate the weighted average risk and return of your portfolio. Then, change the weights of the vehicles in your portfolio to emphasize the high-return performers.

e. Perform another risk assessment using these weightings. Change the weights of the vehicles in your portfolio to emphasize the low-risk performers. Perform another risk assessment using these weightings.

The selected bond issued by Santa Rosa, California Wastewater Series A. The maturity date for this bond is September 1, 2024. The interest rate is 4.375%, and the CUSIP # is 802649NT6.

http://california.municipalbonds.com/bonds/issue/802649NT6

Be sure to properly cite the source(s) of the data that you used for your calculations. I'm not very good with math so for computational problems please use either Word or Excel and show step by step on how you obtain the answers. Thanks.

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Solution Summary

This solution shows step-by-step calculations in an Excel file to analyze a stock and a bond for General Electric. It calculates the averaged return, standard deviation, yield, and coefficient of correlation on bond and the stock.

Solution provided by:
Jayant Kumar, MBA
Education
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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