FINS5513 Investments and Portfolio Selection
The Complete Exam Bible · T3 2026FINS5513 Overview
- 6 units of credit
- Postgraduate finance
- Term 3 2026
- In-person Kensington
- Ten teaching weeks
FINS5513 Investments and Portfolio Selection is a postgraduate finance course at UNSW Sydney offered in Term 3, 2026. It develops a connected framework for analysing financial markets, measuring risk and return, pricing risky assets, constructing investment portfolios and evaluating investment strategies.
- Assessment Engagement, a mid-term test, a portfolio project and a whole-course final
- Quantitative habit Define the variable, print the formula, substitute, calculate and interpret
- Project focus Connect spreadsheet results and graphs to portfolio theory and model limitations
- Final preparation Rebuild methods across all ten teaching weeks and verify current instructions on Moodle
What you get in the full FINS5513 Exam Bible
- 10 chapters, 36 pages — every examinable topic, week by week
- 21 original practice questions, each with a model answer in the Final exam format
- 10 worked examples, solved the way FINS5513 marks
- 9 computed figures, redrawn from the course’s own numbers
- Exam-morning plan for the Final exam (50%) — what to revise last, where marks are lost
Free on this page: assessment table, chapter map, one worked example, key terms, FAQ. The rest is in the full exam bible.
How FINS5513 is assessed
| Component | Weight | Format |
|---|---|---|
| Engagement | 10% | In-lecture questions across Weeks 2 to 10; participation requirements are stated on Moodle |
| Mid-Term Test | 25% | Saturday Week 6, 24 October 2026; on campus, invigilated, closed book; covers Lectures 1 to 4 |
| Term Project | 15% | Excel spreadsheet plus 600 words; due 11am Friday 6 November 2026; portfolio optimisation, graphs, theory and limitations |
| Final exam | 50% | UNSW exam period; on campus, invigilated, closed book, Inspera with Safe Exam Browser; entire course; typically 2 hours plus 15 minutes reading |
The four weighted rows total 100%. Weekly Understanding Key Concepts mini-quizzes provide feedback but do not contribute to the grade. The current T3 source does not publish the final section breakdown, question types, formula-sheet rule or calculator rule; confirm those details on Moodle.
What other students are asking about FINS5513
- Where can I find lecture notes or study guides for FINS5513 at UNSW?
- The FINS5513 study guide in AskSia Library covers Investments and Portfolio Selection in 10 chapters, with the assessment table, a chapter-by-chapter topic map, key terms and a worked example, free to read on this page.
- Is there a final exam in FINS5513, and how much is it worth?
- Yes. In the offering this AskSia Library guide is built from, Final exam carries 50% of the FINS5513 mark; the full split is Engagement 10%, Mid-Term Test 25%, Term Project 15%, Final exam 50%.
- What does FINS5513 cover on return, risk and investor choice?
- In AskSia Library's FINS5513 guide, the Return, Risk and Investor Choice chapter explains holding-period return, annualisation, variance, covariance, Sharpe ratio and utility from Week 2.
- What does FINS5513 cover on markowitz portfolio optimisation?
- In AskSia Library's FINS5513 guide, the Markowitz Portfolio Optimisation chapter explains diversification, the efficient frontier, capital allocation and investor risk aversion from Week 3.
- What does FINS5513 cover on capm and the security market line?
- In AskSia Library's FINS5513 guide, the CAPM and the Security Market Line chapter explains beta, systematic risk, equilibrium required return and mispricing from Week 4.
Current FINS5513 dates
| Date | Item | Control |
|---|---|---|
| 24 October 2026 | Mid-Term Test | Saturday of Week 6 |
| 6 November 2026 | Term Project | 11am Friday of Week 8 |
| UNSW exam period | Final exam | Exact date and venue on myUNSW and Moodle |
Dates are as published in the T3 2026 course outline and course overview. Confirm exact deadlines and submission settings in the live LMS.
What FINS5513 covers
FINS5513 moves from market mechanics and the measurement of return and risk into Markowitz portfolio choice, CAPM, the single-index model and active factor strategies. It then tests market efficiency, evaluates portfolio performance, prices bonds from yields and spot rates, and closes with duration and immunisation. The sequence follows the ten teaching weeks in the T3 2026 outline.
Investment Markets and Trading
Indices, orders, trading costs, margin accounts and managed funds from Week 1Week 1 establishes the market mechanics that sit underneath every later return. A price-weighted index responds to constituent share prices and needs a revised divisor after a split or constituent change so that a non-economic event does not move the index.
- Price-weighted index level, revised divisor and continuity after a stock split
- Value-weighted index growth from changes in aggregate market capitalisation
- Market orders, limit orders, bid, ask, spread, commission and market impact
- Long-margin equity, live margin percentage and maintenance-call price
- Short-sale account balance, repurchase value and short margin boundary
- Open-end funds, closed-end funds and exchange-traded funds
Return, Risk and Investor Choice
Holding-period return, annualisation, variance, covariance, Sharpe ratio and utility from Week 2Week 2 turns market observations into portfolio inputs. Holding-period return combines the price change and income earned over the actual investment interval.
- Holding-period return from ending value, beginning value and income
- APR and effective annual return across different investment horizons
- Ex ante expected return and probability-weighted variance
- Ex post arithmetic mean and sample variance using n minus one
- Sharpe ratio as excess return per unit of total risk
- Quadratic utility and the effect of investor risk aversion
Markowitz Portfolio Optimisation
Diversification, the efficient frontier, capital allocation and investor risk aversion from Week 3Week 3 converts return, variance and covariance inputs into an opportunity set. Diversification comes from combining assets whose returns are less than perfectly positively correlated.
- Diversification benefit as correlation falls below plus one
- Minimum-variance frontier for target expected returns
- Global minimum-variance portfolio and the dominated lower branch
- Efficient frontier as the upper portion of the risky opportunity set
- Risk-free asset, complete portfolios and the capital allocation line
- Tangency portfolio P star and the maximum Sharpe ratio
CAPM and the Security Market Line
Beta, systematic risk, equilibrium required return and mispricing from Week 4Week 4 derives an equilibrium relation between expected return and systematic risk.
- CAPM assumptions and the separation result
- Market portfolio as the common optimal risky portfolio
- Beta from covariance with the market divided by market variance
- Systematic risk versus diversifiable firm-specific risk
- CAPM required return from risk-free rate and market premium
- Security market line intercept, slope and beta axis
Single-Index Model and Regression
Alpha, beta, residual risk, regression fit and two-pass tests from Week 5Week 5 turns the CAPM relation into an empirical regression. The single-index model generally uses excess returns, with asset excess return equal to alpha plus beta times market excess return plus a residual.
- Excess-return single-index regression and raw-return alternative
- Security characteristic line intercept, slope and residual
- Alpha as benchmark-relative abnormal return or model misspecification
- Total variance split into systematic and residual variance
- R-squared as the systematic share of total variance
- SIM covariance from asset betas and market variance
Active Portfolios and Factor Models
Treynor-Black weights, information ratio, APT and multi-factor exposure from Week 6Week 6 asks how an investor should use security analysis without confusing a forecast with a free profit. The Treynor-Black framework starts from a passive market portfolio and adds an active portfolio built from securities with forecast alpha.
- Active forecasts measured as alpha relative to a benchmark model
- Raw active scores equal to alpha divided by residual variance
- Normalised active weights, active alpha and residual variance
- Information ratio as active return per unit of residual risk
- Combination of a passive market portfolio and an active portfolio
- Beta adjustment and the limits of concentrated active positions
Market Efficiency and Behaviour
EMH forms, event studies, anomalies, behavioural biases and technical trading from Week 7Week 7 changes the question from how to construct a portfolio to whether information can support repeatable abnormal returns. Weak-form efficiency says current prices reflect information in past prices and trading data.
- Weak, semi-strong and strong efficiency classified by information set
- Joint-hypothesis problem in every test of abnormal performance
- Event-study estimation windows, event windows and benchmark returns
- Abnormal return and cumulative abnormal return calculations
- Momentum, reversals and post-announcement drift as empirical patterns
- Overconfidence, representativeness, conservatism and loss aversion
Performance Evaluation and Bond Pricing
Risk-adjusted measures, attribution and coupon-bond valuation from Week 8Week 8 joins two applications of present and benchmark-relative value. Performance evaluation asks whether a realised return compensated investors for the risk that was taken.
- Sharpe ratio for total risk and Treynor ratio for systematic risk
- Jensen alpha and information ratio relative to stated benchmarks
- M-squared as a volatility-matched return comparison
- Benchmark-relative allocation and selection attribution
- Bond cash-flow timelines with coupons and redemption value
- Price as discounted value using consistent periodic units
Yield Curves and Forward Rates
Realised yield, spot rates, bootstrapping, forward rates and term premiums from Week 9Week 9 replaces one yield-to-maturity discount rate with a term structure of zero-coupon spot rates.
- Realised compound yield from coupons, reinvestment and sale proceeds
- Spot rates and discount factors for maturity-specific cash flows
- Coupon-bond valuation using a complete spot-rate curve
- Sequential bootstrapping from short to longer maturities
- Forward rates derived from no-arbitrage holding-period equality
- Correct exponents for one-year and multi-year forward intervals
Duration and Bond Portfolio Immunisation
Interest-rate sensitivity, modified duration, value matching and rebalancing from Week 10Week 10 measures how the timing of bond cash flows determines interest-rate sensitivity. Macaulay duration is the present-value-weighted average time to cash flows.
- Macaulay duration as a present-value-weighted cash-flow time
- Zero-coupon duration and the effect of earlier coupon payments
- Modified duration as local percentage-price sensitivity
- First-order price-change approximation with decimal yield changes
- Duration comparisons across maturity, coupon and yield
- Convex price-yield relation as a limitation of linear duration
The official sequence begins with market structure, securities, index construction, trading orders, transaction costs, margin accounts and managed funds. It then defines holding-period return, annualisation, expected return, variance, covariance, correlation, the Sharpe ratio and investor utility.
Those inputs feed Markowitz portfolio optimisation, where correlation creates diversification, the minimum-variance frontier separates efficient from dominated portfolios, and the risk-free asset creates a capital allocation line through the maximum-Sharpe risky portfolio. CAPM then prices systematic risk through beta and the security market line.
The single-index model converts that equilibrium language into an empirical regression with alpha, beta and residual risk, while active management and multi-factor models ask whether forecast alpha is large enough relative to residual uncertainty. Market-efficiency analysis shifts the focus to information sets, event studies, anomalies, behavioural biases and technical signals.
Portfolio evaluation compares Sharpe, M-squared, Treynor and information-ratio measures and separates allocation from selection effects. The fixed-income block prices coupon bonds, distinguishes YTM from realised yield, values cash flows with spot rates, bootstraps the yield curve, extracts forward rates and interprets term premiums.
The course closes by measuring interest-rate sensitivity through Macaulay and modified duration and by matching the present value and duration of assets with liabilities. Throughout, calculations are expected to lead to an investment interpretation and a statement of the assumptions that make the model conclusion valid.
Worked example · free
Two-asset portfolio risk and the diversification gain
- +1Expected return is 0.60 times 10% plus 0.40 times 6%, which equals 8.40%.
- +1Covariance is 0.25 times 0.12 times 0.08, which equals 0.0024.
- +1Portfolio variance is 0.60 squared times 0.12 squared plus 0.40 squared times 0.08 squared plus twice 0.60 times 0.40 times 0.0024, which equals 0.00736. Standard deviation is 8.58%.
- +1Sharpe ratio is the 6.40% risk premium divided by 8.58% risk, which equals 0.746. Correlation below one creates the diversification gain.
Key terms
- Holding-Period Return
- Total price change plus income over the actual investment horizon, divided by opening value.
- Efficient Frontier
- The upper branch of minimum-variance portfolios that offers the highest expected return for each risk level.
- Security Market Line
- The CAPM relation between beta and required expected return for individual assets and portfolios.
- Single-Index Model
- A regression linking an asset's excess return to market excess return through alpha, beta and a residual.
- Information Ratio
- Model-relative alpha divided by residual standard deviation, measuring active return per unit of active risk.
- Semi-Strong Efficiency
- The claim that prices already reflect all publicly available information.
- Yield to Maturity
- The single discount rate equating a bond's promised cash flows with its current price.
- Spot Rate
- The current discount rate for a default-free cash flow paid at one specified maturity.
- Macaulay Duration
- The present-value-weighted average time to a bond's cash flows.
- Immunisation
- A maintained strategy that matches asset and liability present values and durations to offset local rate risk.
FINS5513 FAQ
How difficult is the course?
The challenge comes from connecting several models while keeping notation and assumptions consistent. Students repeatedly move between raw and excess returns, variance and standard deviation, total and systematic risk, and yields with different maturities. Weekly calculation practice makes those distinctions manageable.
What is assessed during the term?
The current structure includes Engagement worth 10%, a Mid-Term Test worth 25%, a Term Project worth 15%, and a Final exam worth 50%. The test covers Lectures 1 to 4, while the final covers the entire course.
What is known about the final exam?
The current T3 materials state that it is on campus, invigilated, closed book and delivered through Inspera with Safe Exam Browser. It covers the whole course and is typically two hours plus fifteen minutes reading. Specific question types and aids are not published in the captured T3 material.
Does any component have a hurdle?
The source requires an overall course result of 50/100 or higher together with active engagement and attempted assessment requirements. It does not label an individual weighted component as a separate hurdle, so no component carries a hurdle badge here.
What does the portfolio project require?
The project uses an Excel spreadsheet and a 600-word written component. Students analyse and graph portfolio results, apply portfolio theory, and discuss model limitations. It covers material from Weeks 2 to 5 and is due in Week 8.
How much mathematics is involved?
The course is strongly quantitative. It uses return compounding, probability, variance and covariance, regression, portfolio optimisation, asset-pricing relations, bond present value, spot and forward rates, duration and immunisation. Interpretation and model limitations remain part of the answer.
Are past final papers available here?
The captured course folder contains weekly worked examples and practice quizzes but no past final, sample final, practice final or returned final solution. The current outline describes the final as confidential, so the practice in this guide uses original numbers and the weekly solution methods.
Is this an official UNSW guide?
No. This is an independent AskSia-authored study guide built around the published course structure and teaching concepts. It is not affiliated with or endorsed by UNSW Sydney, and live Moodle instructions control dates, venues and exam operations.
Questions students ask in each FINS5513 chapter
- Why does a stock split change the divisor?
- A split changes the quoted share price without creating or destroying investor wealth. Revising the divisor keeps a price-weighted index at the same level immediately before and after the split, so later movement reflects prices rather than arithmetic discontinuity. Chapter 01 · Investment Markets and Trading
- When is holding-period return annualised?
- Annualise only after calculating the total return over the stated horizon. Use the effective compounding conversion when the question asks for an annual compound rate, and retain the holding period in years. Chapter 02 · Return, Risk and Investor Choice
- What does lower correlation change?
- Lower correlation bends the opportunity set left by reducing portfolio variance. It does not change the weighted expected return when asset returns and weights are held fixed. Chapter 03 · Markowitz Portfolio Optimisation
- Why is total volatility not priced?
- Investors can diversify firm-specific volatility without giving up expected return. CAPM therefore rewards only the covariance an asset contributes to the market portfolio, summarised by beta. Chapter 04 · CAPM and the Security Market Line
- Why does the model use excess returns?
- Subtracting the risk-free rate aligns the regression with CAPM's risk-premium relation. Raw-return notation can be used, but the intercept then has a different numerical interpretation and must be identified. Chapter 05 · Single-Index Model and Regression
- Why divide alpha by residual variance?
- Alpha is the forecast benefit, while residual variance measures security-specific uncertainty. Their ratio gives more emphasis to forecasts that are large relative to noise and penalises imprecise ideas more strongly than an alpha ranking alone. Chapter 06 · Active Portfolios and Factor Models
- Does efficiency mean every price is correct?
- No. Efficiency is a claim about whether available information permits systematic abnormal profit after risk and costs. Prices can move, contain estimation error and later appear wrong without automatically creating an exploitable strategy. Chapter 07 · Market Efficiency and Behaviour
- Why can performance rankings disagree?
- Measures use different definitions of risk and different benchmarks. A concentrated fund may look weak on total volatility but stronger on beta, while benchmark choice can materially change alpha and active-risk calculations. Chapter 08 · Performance Evaluation and Bond Pricing
- Why not discount every coupon at YTM?
- YTM is one internal rate summarising a bond's price. Spot valuation instead assigns a market discount rate to each maturity and is the no-arbitrage approach when the term structure is available. Chapter 09 · Yield Curves and Forward Rates
- Why is coupon-bond duration below maturity?
- Some value is received through coupons before the final date. Those earlier present-value weights pull the weighted average payment time below maturity, unlike a zero-coupon bond with only one terminal payment. Chapter 10 · Duration and Bond Portfolio Immunisation
How to study for the exam
Treat the course as four connected toolkits. First, stabilise return and risk notation: holding-period return, annualisation, expected return, variance, covariance, correlation and Sharpe ratio. Second, link portfolio choice to asset pricing: build the risky frontier, identify the maximum-Sharpe portfolio, allocate with risk aversion, and then distinguish beta pricing under CAPM from regression estimates under SIM.
Third, connect active management to market efficiency: scale alpha by residual risk, read factor loadings, classify efficiency claims by information set, and test abnormal return against a named benchmark. Fourth, build fixed income from dated cash flows: price bonds, separate YTM from realised yield, bootstrap spot rates, derive forward rates, calculate duration and match liabilities.
For every quantitative exercise, label units and timing, show intermediate values and finish with a decision or limitation. Use the weekly worked examples as method practice and the Moodle quizzes for retrieval. Before the Week 6 test, concentrate on Chapters 1 to 4. Before the project, rebuild Weeks 2 to 5 in a spreadsheet and explain why model assumptions matter.
Before the final, revise all ten chapters and confirm the current Inspera, venue and permitted-material instructions on Moodle.
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