Mr. Fahim is estimating Beta for BSCCL using last monthly data for last 5 years. The regression results show that beta of BSCCL is currently 1.2. He also finds the following information form his dataset.
Mr. Fahim is estimating Beta for BSCCL using last monthly data for last 5 years. The regression results show that beta of BSCCL is currently 1.2. He also finds the following information form his dataset.
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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Mr. Fahim is estimating Beta for BSCCL using last monthly data for last 5 years. The regression results show that beta of BSCCL is currently 1.2. He also finds the following information form his dataset.
Transcribed Image Text:Mr. Fahim is estimating Beta for BSCCL using last monthly data for last 5 years. The regression
results show that Beta of BSCCL is currently 1.2. He also finds the following information from
his dataset.
• Yearly average return of BSCCL is 7%.
The correlation between BSCCL and DSEX is 0.44.
• DSEX index return is 15%
• Standard deviation of DSEX return is 20%
• I-year Treasury bill rate is 6%
Required:
1. Using the adjusted beta approach, calculate the expected return of BSCCL
2. Calculate the total risk of BSCCL
3. Decompose the total risk of BSCCL between systematic and non-systematic risk.
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