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Instructions for RPM Assignment – Part 2
Important Instructions:
1. For any technical issues relating to your trading account should be directed to Mrs Alpana Trivedi ([email protected]).
2. All the calculations and analyses MUST be done in an Excel Spreadsheet Template.
This Excel spreadsheet should be submitted with the report.
It should be named as follows: BFF/BFB3121_Portfolio Project_xxxxxx.
Replace xxxxx with your own student ID. Use BFF3121 or BFB3121 according to your own cohort.
3. You also need to produce a 3-5 minutes (maximum) video presentation (see page 7 of this document).
4. All the return calculations should be presented as decimals, not percentages, and approximated to six decimal points.
5. Late submission penalty: Initial penalty is 5% if assignments are delayed by up to 72 hours. Then 5% penalty per day (including weekends and holidays) of the total marks earned.
6. Assessment type: Individual
7. Weight: 25%. (20% for report + 5% for video presentation); Marks: out of 125.
8. Word limit: Maximum 5 pages (Font: Times New Roman; Font size: 12; Line space: 1)
9. The trade confirmation will appear in your trade management module and transaction log module. Detailed transaction history should be downloaded to an Excel spreadsheet and submitted as a separate tab in the supplied Excel Template.
10. Excel will be checked to ensure correctness of the procedure, not for marking. If your calculation goes wrong, your findings/interpretation in the report will also go wrong for which you will lose marks.
11. Regularly check “RPM Q/A forum” to post/discuss RPM related issues.
Data sources
ASX200 Index: Yahoo finance web site (https://finance.yahoo.com/)
Australian 90 day T-bill rates: Use the 90 days bank discount rate as the risk-free rate. You can visit RBA (www.rba.gov.au) or Australian Department of Treasury (treasury.gov.au)
Please use 90-day Bank bill rate for March 2024 to proxy Risk-free rate and use the same Risk- free rate for the whole trading period.
Two separate files have been uploaded to assist you with the above. You will find Weekly-Monthly Conversion of Risk-free Rate and the associated 90-day BAB rate file (source RBA).
You must quote your relevant data sources in your report.
Your Trading Journey:
Objective
The objective of this project is for you to manage a portfolio by investing $500,000 of your imaginary money in any stocks, options, or futures that are traded on the Australian, US and other international stock exchanges and to fulfill your assigned client’s investment goals. You can also execute short selling, and trade on margin at an annual interest rate of 4%. There is no need that your portfolio should necessarily outperform. the market. What you are expected to do is to use the concepts you learn in this unit to take buy/sell/hold decisions of securities, trade frequently, analyse the performance of your portfolio and submit the report together with a 3-minute video presentation along other necessary files.
Project Background
The investment project started when your account in 'Rotman Portfolio Manager' (RPM) with a cash balance of $500,000 on Monday in Teaching week 2 on 4rth March 2024 (Melbourne, Australia time). This is the week 1 of your eight-week investment horizon. You then take buy/sell/hold decisions of securities throughout each week over an investment period of eight weeks. Your investment period ends on Saturday in teaching week 9, 4rth May 2024. You were required to undertake at least 3 trades per week.
It is very important that you use the investment concepts that you learn in this unit in your buy/sell/hold strategies/decisions. These concepts include the following: financial instruments and markets; historical returns of various financial assets; risk aversion and capital allocation; assets allocation and security selection; risk-return trade-off; diversification and risk reduction; market risk and diversifiable risk; margin trading and short selling; fundamental analysis and any observable market anomalies; and equity valuation and detecting mispriced securities. In addition, you should also monitor the performance of various stock markets, domestic/regional/global economies, and other domestic/regional/global events to develop a sense of what is happening before taking buy/sell/hold decisions.
You can invest a portion of your money (i.e. idle cash) in risk-free money market funds that will earn 1% per annum. The trading simulation has been set-up assuming that the money that you did not invest in risky securities is invested in money market funds earing the above rate. This means that you do not need to specifically invest in money market funds. However, the maximum amount you can invest in money market funds at any time is $100,000. This means that all the remaining money should be invested in risky securities. If you invest more than $100,000 in money market funds (i.e. you have left your investable fund as unused cash for more than 3 weeks), you will lose a total of 5% of your overall marks.
It is very important that you download the entire trading history of your account to an Excel spreadsheet on the last day of trading. This should provide evidence that you have engaged in active trading during the eight-week investment horizon. We will cross check this trading history with your trading account for authenticity. This trading history should be submitted with your report inserted in the second tab of Excel file. If you don’t submit the trading history, your report will not be marked and you will get zero marks for the project.