i) ii) iv) Compute the following. Calculate the correlation coefficient between BHP and S&P/ASX200 and interpret...

 

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i) ii) iv) Compute the following. Calculate the correlation coefficient between BHP and S&P/ASX200 and interpret the answer. (2 marks) Calculate the beta of BHP and interpret the answer. (2 marks) Assuming the market risk premium of 6% and the risk-free rate of 1%, compute the required rate of return of BHP Ltd. (2 marks) Assuming the annual average return of 15% for BHP, is BHP underpriced or overpriced? Would you buy or sell BHP shares? (3 marks) v) Draw the Security Market Line using answers you obtained above. Label X-axis, Y-axis and intercept. Clearly present values on X- and Y-axis when you locate the expected and required returns of BHP Ltd in the graph. (4 marks) XYZ Ltd 1 July 2021 4 September 2021 1 Jan 2022 Price Dividend $41.84 $38.68 $0.46 Assume that you purchased XYZ Ltd shares on 1 July 2021 and sold them on 1 Jan 2022. A dividend of $0.46 was paid on 4 Sep 2021. Calculate the realised return for the period. (2 marks) Use the following information to answer b). BHP Ltd S&P/ASX200 1.3% Monthly average return Standard Deviation Covariance between BHP and S&P/ASX200 0.0020 0.17% 7.87% 4.38% i) ii) iv) Compute the following. Calculate the correlation coefficient between BHP and S&P/ASX200 and interpret the answer. (2 marks) Calculate the beta of BHP and interpret the answer. (2 marks) Assuming the market risk premium of 6% and the risk-free rate of 1%, compute the required rate of return of BHP Ltd. (2 marks) Assuming the annual average return of 15% for BHP, is BHP underpriced or overpriced? Would you buy or sell BHP shares? (3 marks) v) Draw the Security Market Line using answers you obtained above. Label X-axis, Y-axis and intercept. Clearly present values on X- and Y-axis when you locate the expected and required returns of BHP Ltd in the graph. (4 marks) XYZ Ltd 1 July 2021 4 September 2021 1 Jan 2022 Price Dividend $41.84 $38.68 $0.46 Assume that you purchased XYZ Ltd shares on 1 July 2021 and sold them on 1 Jan 2022. A dividend of $0.46 was paid on 4 Sep 2021. Calculate the realised return for the period. (2 marks) Use the following information to answer b). BHP Ltd S&P/ASX200 1.3% Monthly average return Standard Deviation Covariance between BHP and S&P/ASX200 0.0020 0.17% 7.87% 4.38%

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To answer your questions Ill need to work through the details provided in the images Compute the following i Calculate the correlation coefficient between BHP and SPASX200 and interpret the answer The ... View the full answer