Mrs Fosu, a successful Sole Proprietor is cash-riched and wants to invest some of her money...
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Mrs Fosu, a successful Sole Proprietor is "cash-riched" and wants to invest some of her money into some classes of stocks on the Ghana Stock Exchange. Being an MBA student, she did her own analysis and decided to invest in two of the three stocks with the following financial history. STOCK A Year 2015 2016 2017 Year 2015 2016 2017 Year 2015 2016 2017 Beginning Price (c) 55.0 54.0 56.0 STOCK B Beginning Price (d) 80.0 62.0 65.0 End Price (c) 58.0 Beginning Price (d) 47.0 51.0 50.5 STOCK C 59.5 65.4 End Price () 68.0 76.5 71.2 End Price (é) 52.0 55.5 36.4 Dividend Paid (6) 3.2 2.8 3.5 Dividend Paid (e) 4.0 3.5 3.0 Dividend Paid (6) 2.1 2.0 5.1 (a) Calculate the mean return and standard deviation of each of the stocks to the nearest har 16 marke) 2015 2016 2017 Year 2015 2016 2017 Beginning Price (3) 80.0 62.0 65.0 End Price (3) STOCK C Beginning Price ( 47.0 51.0 50.5 76.5 71.2 End Price () 52.0 55.5 36.4 3.5 3.0 Dividend Paid ( 21 20 (a) Calculate the mean return and standard deviation of each of the stocks to the nearest percentage whole number. (6 marks) (b) Which of these stocks is more risky? (2 marks) (e) The investor estimates a correlation of 0.22, -0.78 and -0.51 respectively between stocks A&B, A&C and B&C. Calculate the expected return and standard deviation of the portfolio ) by combining stocks A and B if the invested put 50% of the investment in stock A and the remaining in stock B. (2 marks) () Calculate the expocial retums and stand deviation of the portfolio (Y) by combining stocks A and C if the invested put 50% of the investment in stock A and the remaining in stock C. (2 marks) Calculate the expected return and standard deviation of the portfolio (Z) by combining stocks B and C if the invested put 50% of the investment in stock B and the remaining in stock C. (2 marks) d) Which of the portfolics (X, Y or Z) should the investor select and why? (2 marks) e) Distinguish between diversifiable and non-diversifiable risks. Which of these risks is rewardable and why? (4 marks) Mrs Fosu, a successful Sole Proprietor is "cash-riched" and wants to invest some of her money into some classes of stocks on the Ghana Stock Exchange. Being an MBA student, she did her own analysis and decided to invest in two of the three stocks with the following financial history. STOCK A Year 2015 2016 2017 Year 2015 2016 2017 Year 2015 2016 2017 Beginning Price (c) 55.0 54.0 56.0 STOCK B Beginning Price (d) 80.0 62.0 65.0 End Price (c) 58.0 Beginning Price (d) 47.0 51.0 50.5 STOCK C 59.5 65.4 End Price () 68.0 76.5 71.2 End Price (é) 52.0 55.5 36.4 Dividend Paid (6) 3.2 2.8 3.5 Dividend Paid (e) 4.0 3.5 3.0 Dividend Paid (6) 2.1 2.0 5.1 (a) Calculate the mean return and standard deviation of each of the stocks to the nearest har 16 marke) 2015 2016 2017 Year 2015 2016 2017 Beginning Price (3) 80.0 62.0 65.0 End Price (3) STOCK C Beginning Price ( 47.0 51.0 50.5 76.5 71.2 End Price () 52.0 55.5 36.4 3.5 3.0 Dividend Paid ( 21 20 (a) Calculate the mean return and standard deviation of each of the stocks to the nearest percentage whole number. (6 marks) (b) Which of these stocks is more risky? (2 marks) (e) The investor estimates a correlation of 0.22, -0.78 and -0.51 respectively between stocks A&B, A&C and B&C. Calculate the expected return and standard deviation of the portfolio ) by combining stocks A and B if the invested put 50% of the investment in stock A and the remaining in stock B. (2 marks) () Calculate the expocial retums and stand deviation of the portfolio (Y) by combining stocks A and C if the invested put 50% of the investment in stock A and the remaining in stock C. (2 marks) Calculate the expected return and standard deviation of the portfolio (Z) by combining stocks B and C if the invested put 50% of the investment in stock B and the remaining in stock C. (2 marks) d) Which of the portfolics (X, Y or Z) should the investor select and why? (2 marks) e) Distinguish between diversifiable and non-diversifiable risks. Which of these risks is rewardable and why? (4 marks)
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Related Book For
Managerial Decision Modeling with Spreadsheets
ISBN: 978-0136115830
3rd edition
Authors: Nagraj Balakrishnan, Barry Render, Jr. Ralph M. Stair
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