College of Business, Hospitality and Tourism Studies

Department of Banking and Finance

FIN 701 Investment and Portfolio Analysis

ASSIGNMENT Evening Students

Trimester 1 2017

TOTAL WEIGHTING: 15% Write up and 5% Oral Presentation

INSTRUCTIONS
Standard university regulations in regards to assessments apply.
The assignment can be done in pairs.
A turn-it-in facility will be provided on the Moodle for preliminary plagiarism checking as well as
final project submission drop box. A maximum of 30% similarity index is allowed. Any group
that has higher level of similarity index will automatically get 0/40 for this assignment and will
not be allowed to re-submit.
The project is due on MOODLE at 10pm, 13 th April, 2017 and the drop box facility will expire
accordingly. No further extensions will be provided.
Date and time for oral presentations will be provided later.
Hardcopies of the project are due before the presentation. No group shall be allowed to present
without the submission of the hardcopy.
Your assignment should be typed in Times New Roman or Calibri with font size 12 and 1.30 line
spaced.
Provide a complete reference list.
Please ensure that the assignment does not exceed 30 pages and should not include any
unnecessary information.
Section A: Historical Information
Examine the investment policy of Unit Trust of Fiji and Fijian Holdings Unit Trust over a 5 year
period (2011-2015).
Carry out description of their investment portfolio
Type of assets
Weight of each asset
Use graphs and diagrams
(25 marks)
Section B: Risk and Return
Examine the trend in their performance and rate of return on their investment over this period
and try to explain the trend. (Use calculations to justify through the application of relevant
formulas).

Measure Return
Arithmetic Mean
Calculate annual capital gain yields, dividend yields, and total yields
(15 Marks)

Section C: Regression Analysis

Plot and describe the annual total yields of both the unit trusts and compare them against
the annual total yields from holding a market portfolio on the South Pacific Stock Exchange.
Compute the total risk (standard deviation of returns) of both the trusts and the total risk of
the market portfolio.
Discuss systematic and unsystematic risk. Report on the systematic and unsystematic risk of
the two trust funds.
What is the internal rate of return (IRR) of the two unit trusts? Interpret the IRR. List the
assumption(s) inherent in the IRR computations.
Compute the geometric average rates of returns of both the trusts and of the market
portfolio.

(30 Marks)

Section D: Required Return and Valuation

Calculate and plot both the Trusts historical growth rate of dividends and discuss the
trend
What is the required rate of return for returns form the two Trusts? For estimating the
required rate of return, find return on Government Treasury Bills which will be the risk-
free rate of return.
 This can be calculated using the following (Capital Asset Pricing Model) equation:
E(R) = RFR + stock (Rmarket RFR)

Where:

E(R) = the required rate of return, or expected return

RFR = the risk free rate of return
stock = beta of the stock
Rmarket = return of the market as a whole

Use the arithmetic average market return during the last 5-10 years to estimate the
expected market return.
Compute your best judgment value of the shares (units) of the two Trust Funds. To
estimate the value of the two trusts, use the cash flows associated with each trusts
units. List any assumptions and/or estimates you made for this step. (calculate the
intrinsic value of the units using the constant growth model and the average growth
rate in dividends)
(30 Marks)

Note: Annual reports for both the Unit Trusts are provided in separate files for your use, you
may notice that few years annual reports are not provided but a specific years report has past
one or two years of data which you could use for your calculations (for example UTOF annual
report 2012, has 2012 data as well as 2011 and 2010).