Suppose an investor is considering to buy share in CDE Ltd and ABC Ltd, which has a
Fantastic news! We've Found the answer you've been seeking!
Question:
Suppose an investor is considering to buy share in CDE Ltd and ABC Ltd, which has a market price Rs 250 and Rs 300 today respectively.
CDE Ltd | ABC Ltd | ||||
Economic Conditions | Probability | Share Price | Dividend | Share Price | Dividend |
% | Rs | Rs | |||
Scenario 1 | 25 | 306 | 4 | 355 | 3 |
Scenario 2 | 75 | 287 | 5 | 345 | 2 |
The investor want to hold 40% of share in CDE Ltd and 60% in ABC Ltd’s shares for one year. Calculate the following:
- Individual expected return for each company
- Individual standard deviation for each company
- Expected return of portfolio based on the choice of the investor
- Standard deviation of portfolio based on the choice of the investor
Calculate the proportion that the investor should invest to achieve minimum variance portfolio.
Related Book For
Introduction To Derivatives And Risk Management
ISBN: 9781305104969
10th Edition
Authors: Don M. Chance, Robert Brooks
Posted Date: