Asenso Entreprises is a firm that has been listed on the Ghana stock Exchange for many years. Asenso  Enterprises recently launched its popular product. Asenso cola. Due to this, it is expected that dividends and earnings will grow quickly over the next three years. Dividends and earnings are  projected to grow at 20%, 15% and 10% respectively over the next three years. Dividends are then  expected to grow at a more normal rate of 7% a year forever. Asenso Enterprises just paid a dividend  of GH 2 per share. Government treasury bills are offering a rate of 10% p.a whereas the market return  has been given as 15%. You have also been given the following returns for the market and  Asenso Enterprise:

 

i. Compute the systematic risk for this stock

ii. Compute investors required rate of return for the stock

iii. Compute the price of this stock 

iv. Should you invest in this stock if the current market price is GHs 18

v. Both Beta and standard deviation measure risk. Should an investor in a well-diversified portfolio be concerned about both? What is risk reduction in a portfolio context and why does risk reduction appear to stop at some point even with a diversified portfolio?

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Month 1 2 3 4 st 5 6 Market return -9 5 13 -7 3 9 Asenso Enterprises -13 9 20 -12 7 5 Month 1 2 3 4 st 5 6 Market return -9 5 13 -7 3 9 Asenso Enterprises -13 9 20 -12 7 5

Answer rating: 100% (QA)

i To compute the systematic risk for this stock we need to calculate its beta We can use the market return and Asenso Enterprises return data given to us to calculate beta using the following formula ... View the full answer