Exercise 2: You are evaluating the investment in two companies whose past ten years' return are shown below: Salalah Mills Oman Mills Year 1 7 49 4 4 16 9. 81 -3 9. -2 4 36 1 1 8 64 5 25 N= EX =22 E X? =174 ΣΧ 15 ΣΧΕ115 Calculate the Average Return and Risk of each company's return? Which of the two companies are more risky and why? 2. 3. LO
Exercise 2: You are evaluating the investment in two companies whose past ten years' return are shown below: Salalah Mills Oman Mills Year 1 7 49 4 4 16 9. 81 -3 9. -2 4 36 1 1 8 64 5 25 N= EX =22 E X? =174 ΣΧ 15 ΣΧΕ115 Calculate the Average Return and Risk of each company's return? Which of the two companies are more risky and why? 2. 3. LO
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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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.
Question
Transcribed Image Text:Exercise 2: You are evaluating the investment in two companies whose past ten years'
return are shown below:
Salalah Mills
Oman Mills
X2
Year
X
1
7
49
4
4
16
81
3
-3
-2
4
36
1
1
5
8
64
25
ΣΧ15
E X? =115
N=
ΣΧ-22
Σχ174
Calculate the Average Return and Risk of each company's return? Which of the two
companies are more risky and why?
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