How do calculate each of the stock expected return and risk

Assignment Help Financial Accounting

Reference no: EM132634975

Assume you are a portfolio manager at JS Global Capital Ltd. Recently you came across three attractive stocks and want to portfolio investment in these three stocks. The details of the stocks are given below:

Company name Meezan Bank Ltd Lucky Cement Ltd KE Ltd

Volatility (Standard deviation) 0.25 0.35 0.40

Weight in Portfolio 12% 25% 13%

Correlation with the market portfolio 0.40 0.60 0.50

The expected return on the market portfolio is 8% and its volatility is 10%. The risk-free rate based on central bank's discount rate is 3%.

Question a. Calculate each of the stock's expected return and risk (beta) as compared to the market.

Question b. What should be the expected return of the portfolio based on values calculated in part a.

Question c. Calculate the beta of the portfolio? what does it tells regarding the riskiness of the portfolio?

Question d. Using the values from part c, can you calculate the expected return of the portfolio? Is it similar to your answer in part b? Why or why not?

Reference no: EM132634975

Questions Cloud

Explain how an arbitrage may be created : If the actual forward price is $92, explain how an arbitrage may be created.

What is project npv if all variables are as expected : The project will last for 10 years and requires an initial investment of $1.06 million, which will be depreciated straight-line

How calculate weighted average cost of capital for the firm : Which project(s) should be accepted if they are mutually exclusive? Explain. Calculate the weighted average cost of capital for this firm?

What is net income-precious metal mining : Precious Metal Mining has $10 million in sales, its ROE is 16%, and its total assets turnover is 2.5x. Common equity on the firm

How do calculate each of the stock expected return and risk : Assume you are a portfolio manager at JS Global Capital Ltd. Calculate each of the stock's expected return and risk (beta) as compared to the market.

Prepare the necessary journal entries for Alsop investment : The fair value of Stone Services Inc. Ordinary shares on December 31, 2002, Prepare the necessary journal entries for Alsop investment

How can risk be managed for personal homeowners insurance : How can risk be managed for personal homeowners insurance, and for commercial property insurance?

Calculating cash flows of the project : The director of East West Bearings forgot to mention one important expenditure which their company has incurred in

What is the purpose of capital budgeting : The Japanese owner of 7-Eleven is buying the Speedway chain of gas stations from Marathon Petroleum (MPC) for $21 billion.

User Account

All Pages