Jane wants to invest in ABC stocks but wants assistance to determine the required rate of return
Question:
Jane wants to invest in ABC stocks but wants assistance to determine the required rate of return she should expect.The information she has collected are as follows:Government Treasury bill = 5%, Beta = 1.4, Rm = 10%.
Requirement:
a.If Jane wants to earn 12% and higher, should she invest in ABC?
b.Draw a SML depicting beta.
2.You are given the expected rate of return for three assets for the next three years:
Asset L
2018 10%
2019 12%
2020 14%
Asset M
201814%
201912%
202010%
Asset N
201810%
201911%
202012%
Requirement:Determine which would be the least risk investment by comparing the coefficient of variations for the following options:
a)100% investment in Asset L
b)50% investment in Asset L & 50% investment in Asset M
c)60% investment in Asset L & 40% investment in Asset N
Fundamentals of Financial Management
ISBN: 978-0324664553
Concise 6th Edition
Authors: Eugene F. Brigham, Joel F. Houston