The market price of a share of Aconite Ltd is $ 375 and the company has...

 

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The market price of a share of Aconite Ltd is $ 375 and the company has just paid dividend $ 3 per share. The investment manager has made the following forecast for one year ahead. (a) (b) Economic conditions under Scenario A Scenario B Scenario C Probability 50% 20% 30% Market price Dividend per per share ($) share ($) 390 3.50 385 3.75 425 4.50 Calculate the total returns of Aconite Ltd for each economic conditions. Calculate the expected return Aconite Ltd. (c) Calculate the standard deviation of Aconite Ltd. 3% [5 Marks] Mr. Amary wants to build a portfolio by investing 65% in Aconite Ltd and 35% in Allium Ltd. The expected return and standard deviation of Allium Ltd are as follows: Expected return Standard deviation 15% The correlation coefficient between Aconite Ltd and Allium Ltd is -0.50. (d) Calculate the expected return of Mr. Amary's portfolio. [5 Marks] (e) Calculate the standard deviation of Mr. Amary's portfolio. [2 Marks] [2 Marks] [5 Marks] The market price of a share of Aconite Ltd is $ 375 and the company has just paid dividend $ 3 per share. The investment manager has made the following forecast for one year ahead. (a) (b) Economic conditions under Scenario A Scenario B Scenario C Probability 50% 20% 30% Market price Dividend per per share ($) share ($) 390 3.50 385 3.75 425 4.50 Calculate the total returns of Aconite Ltd for each economic conditions. Calculate the expected return Aconite Ltd. (c) Calculate the standard deviation of Aconite Ltd. 3% [5 Marks] Mr. Amary wants to build a portfolio by investing 65% in Aconite Ltd and 35% in Allium Ltd. The expected return and standard deviation of Allium Ltd are as follows: Expected return Standard deviation 15% The correlation coefficient between Aconite Ltd and Allium Ltd is -0.50. (d) Calculate the expected return of Mr. Amary's portfolio. [5 Marks] (e) Calculate the standard deviation of Mr. Amary's portfolio. [2 Marks] [2 Marks] [5 Marks]

Answer rating: 100% (QA)

a To calculate the total returns of Aconite Ltd for each economic condition well use the formula Total Return Dividend per share Market price per shar... View the full answer