Forecast dividend per share Correlation between the return for k Market portfolio Standard deviation for keana ple Risk free rate Standard deviation for the market portfoll Expected return of market portfolio a) Calculate the company's Be b) Calculate the expected returr c) Explain what will happen ife
Forecast dividend per share Correlation between the return for k Market portfolio Standard deviation for keana ple Risk free rate Standard deviation for the market portfoll Expected return of market portfolio a) Calculate the company's Be b) Calculate the expected returr c) Explain what will happen ife
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
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![QUESTION THREE
Consider the following data for keane plc and market
Forecast dividend per share
£30
Correlation between the return for keane plc and 80%
Market portfolio
Standard deviation for keana ple
20%
4%
Risk free rate
Standard deviation for the market portfolio
Expected return of market portfolio
a) Calculate the company's Beta
b) Calculate the expected return of Kean
c) Explain what will happen if correlation is lower or standard deviation was higher
15%
10%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F415440c2-a3af-4968-afc8-64e4f3e1dfac%2F977eca8d-598b-4db7-a5f2-82643e7867b0%2F782mrmd_processed.jpeg&w=3840&q=75)
Transcribed Image Text:QUESTION THREE
Consider the following data for keane plc and market
Forecast dividend per share
£30
Correlation between the return for keane plc and 80%
Market portfolio
Standard deviation for keana ple
20%
4%
Risk free rate
Standard deviation for the market portfolio
Expected return of market portfolio
a) Calculate the company's Beta
b) Calculate the expected return of Kean
c) Explain what will happen if correlation is lower or standard deviation was higher
15%
10%
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