Reference no: EM133091071

Question - Charlie has decided to purchase a small new apartment 15 kilometers from the city as an investment for $400 000. As this is a large building, payment for the apartment will not need to be made until construction is complete in two and a half years (130 weeks). In order to fund the purchase, Charlie has arranged an 80% loan from the bank ($320 000), which he will pay off on a monthly basis over a 30-year period. The interest rate on the loan is 2.35% p.a. He will rent the property out and the rental income he receives will be enough to cover the principal and interest on the mortgage and also other property related costs during each year. In order to successfully settle the property in two and a half years' time, Charlie will need to save a 20% deposit, and will also require a further $15 000 for legal and bank fees.

Outside of his superannuation and property investments, Charlie decided to allocate some money into shares. He wants to invest in riskier high growth companies that represent the future of the world. His financial advisor Charlotte recommended two companies for him to consider: Coinbase (NASDAQ: COIN) and AGL Energy (ASX: AGL). The beta coefficients of COIN and AGL are 2.78 and 0.36 respectively. What does beta measure and how is it interpreted? Based on his investment goals, which company should Charlie pick and why? Hint: focus on the concept of beta in your answer. You do not need to specifically research the individual companies.