Q No 3 Assume you are a portfolio manager at JS Global Capital Ltd. Recently you came across three attractive stocks and want to create a portfolio investment in these three stocks. The details of the stocks are given below: Company name Volatility (Standard deviation) Weight in Portfolio Correlation with the market portfolio Engro Ltd 25% 0.30 0.40 Lucky Cement Ltd 12% 0.30 0.60 FFC Ltd 13% 0.40 0.50 The expected return on the market portfolio is 8% and its volatility is 10%. The risk-free rate based on central bank’s discount rate is 3%. Calculate each of the stock’s expected return and risk (beta) as compared to the market What should be the expected return of the portfolio based on values calculated in part a. Calculate the beta of the portfolio? what does it tells regarding the riskiness of the portfolio?
Q No 3 Assume you are a portfolio manager at JS Global Capital Ltd. Recently you came across three attractive stocks and want to create a portfolio investment in these three stocks. The details of the stocks are given below: Company name Volatility (Standard deviation) Weight in Portfolio Correlation with the market portfolio Engro Ltd 25% 0.30 0.40 Lucky Cement Ltd 12% 0.30 0.60 FFC Ltd 13% 0.40 0.50 The expected return on the market portfolio is 8% and its volatility is 10%. The risk-free rate based on central bank’s discount rate is 3%. Calculate each of the stock’s expected return and risk (beta) as compared to the market What should be the expected return of the portfolio based on values calculated in part a. Calculate the beta of the portfolio? what does it tells regarding the riskiness of the portfolio?
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 16P
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Q No 3 Assume you are a
Company name |
Volatility (Standard deviation) |
Weight in Portfolio |
Correlation with the market portfolio |
Engro Ltd |
25% |
0.30 |
0.40 |
Lucky Cement Ltd |
12% |
0.30 |
0.60 |
FFC Ltd |
13% |
0.40 |
0.50 |
The expected return on the market portfolio is 8% and its volatility is 10%. The risk-free rate based on central bank’s discount rate is 3%.
- Calculate each of the stock’s expected return and risk (beta) as compared to the market
- What should be the expected return of the portfolio based on values calculated in part a.
- Calculate the beta of the portfolio? what does it tells regarding the riskiness of the portfolio?
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