Bulldogs Inc. has an investment fund amounting to P4,500,000. The portfolio consists of three stocks within the retail industry. P1,350,000 is invested in HLCM, 45% in MWIDE and the remaining in PHN. HLCM and PHN has a beta of 1.50 and 2, respectively. The average return on the market is 9.50% and it is 5% greater than the risk-free rate. The portfolio beta of investment held by Bulldogs Inc. is 2.
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Bulldogs Inc. has an investment fund amounting to P4,500,000. The portfolio consists of three stocks within the retail industry. P1,350,000 is invested in HLCM, 45% in MWIDE and the remaining in PHN. HLCM and PHN has a beta of 1.50 and 2, respectively. The average return on the market is 9.50% and it is 5% greater than the risk-free rate. The portfolio beta of investment held by Bulldogs Inc. is 2.
What is the beta of stock MWIDE?
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