Task:
Question 1
(i) Portfolio 1: 10% property / 70% shares / 20% bonds
(ii) Portfolio 2: 20% property / 65% shares / 15% bonds
b) Based on the portfolio return and portfolio risk calculated in (a), assess the risk-adjusted performance for Portfolio 1 and Portfolio 2 using the following measures:
(i) Risk-to-return ratio
(ii)Return-to-risk ratio
(iii) Sharpe ratio, if the risk-free asset has an average annual return of 1.3%
c) Based on the analysis in (b), how has the change in property allocation impacted the portfolios’ risk-adjusted performance?
Question 2
b) Based on the discount rate calculated in (a) and by assuming the terminal capitalisation rate is at 1% lower than the discount rate, determine the fair value for both REITs in 2020.
Question 3
(ii) Identify and justify the property portfolio that you would recommend to this superannuation fund.
Question 4
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