Captain Fernandez has just taken retirement from the army at the age of 40. Being a middle age person, he is very much fascinated by the returns given by many stocks in the last 2 years period. Out of money received as retirement benefits, he wants to make a portfolio by investing around Rs 20 lakhs. He has come to know that following 5 companies are fundamentally sound and will be good for his portfolio. He wants your advice as to know how much return he can expect? And what will be the risk of his portfolio? Return on the market index is 14% and variance of the return on the index is 25%2. Use Sharpe’s Single Index Model. Stock Weight Alpha (%) Unsystematic risk (%) 2 Total Risk (%)2 Adani Ports 0.25 3.10 55 95 Dabur Ltd 0.15 1.00 25 60 Emami Ltd 0.20 1.50 24 62 Kotak Mahindra Bank 0.30 2.45 30 75 Maruti Suzuki Ltd 0.10 2.95 24 52 ....
Captain Fernandez has just taken retirement from the army at the age of 40. Being a middle age person, he is very much fascinated by the returns given by many stocks in the last 2 years period. Out of money received as retirement benefits, he wants to make a portfolio by investing around Rs 20 lakhs. He has come to know that following 5 companies are fundamentally sound and will be good for his portfolio. He wants your advice as to know how much return he can expect? And what will be the risk of his portfolio? Return on the market index is 14% and variance of the return on the index is 25%2. Use Sharpe’s Single Index Model. Stock Weight Alpha (%) Unsystematic risk (%) 2 Total Risk (%)2 Adani Ports 0.25 3.10 55 95 Dabur Ltd 0.15 1.00 25 60 Emami Ltd 0.20 1.50 24 62 Kotak Mahindra Bank 0.30 2.45 30 75 Maruti Suzuki Ltd 0.10 2.95 24 52 ....
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- Captain Fernandez has just taken retirement from the army at the age of 40. Being a middle age person, he is very much fascinated by the returns given by many stocks in the last 2 years period. Out of money received as retirement benefits, he wants to make a portfolio by investing around Rs 20 lakhs. He has come to know that following 5 companies are fundamentally sound and will be good for his portfolio. He wants your advice as to know how much return he can expect? And what will be the risk of his portfolio? Return on the market index is 14% and variance of the return on the index is 25%2. Use Sharpe’s Single Index Model.
|
Stock |
Weight |
Alpha (%) |
Unsystematic risk (%) 2 |
Total Risk (%)2 |
|
Adani Ports |
0.25 |
3.10 |
55 |
95 |
|
Dabur Ltd |
0.15 |
1.00 |
25 |
60 |
|
Emami Ltd |
0.20 |
1.50 |
24 |
62 |
|
Kotak Mahindra Bank |
0.30 |
2.45 |
30 |
75 |
|
Maruti Suzuki Ltd |
0.10 |
2.95 |
24 |
52 |
|
|
|
|
|
|
....
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