An investor Mr. RCS wants to earn the maximum return from his investment plan of Rs 15,00,000
Question:
An investor Mr. RCS wants to earn the maximum return from his investment plan of Rs 15,00,000 for a tenure of 3 years. He is open to higher risk investment as much as upto earning a return of 55% per year. But, with multiple avenues opened-up, he is confused with which instrument, he should invest at. The following details are available from the NSE India database:
FMCG Sector
CompanyBeta
Marico1.90
P&G-1.12
HUL0.94
Colgate 1.16
Nifty FMCG- 24.20%
Oil and Gas Sector
CompanyBeta
HPCL1.42
BPCL0.97
IOC1.03
MRPL-1.76
NIFTY Oil and Gas - 18.50%
He is very keen to invest in only two (2) company of the same sector. You have to recommend the investor Mr. RCS about the best two company after the elaborate calculations of CAPM for each company with considering the Risk Free Rate as 6.0%.
NB: Request to give detailed explanation with the workings of this problem for me to understand?
Expert Answer:
To recommend the best two companies to invest in we need to calculate the expected return of each company using the Capital Asset Pricing Model CAPM a... View the full answer
