QUESTION 3 Alan, a chartered financial analyst (CFA), is willing to invest two stocks, Bloom stock and Stars stock. He has collected the data on both stocks from Bursa Malaysia. The data as follows: Stock Stock Bloom Stars State of Probability Return (%) Return (%) Economy Recession Normal 0.35 -20 30 0.40 10 20 Вoom 0.25 70 50 Alan has RM100,000 and he plans to invest RM60,000 in Bloom and the remainder in Stars. The market price for Bloom and Stars are RM12 and RM25 respectively. Beta for each stock is 1.2 and 0.5. Required: C. If Alan decide to invest all 100% in Bloom stock, criticise your findings. D. Evaluate the beta portfolio and each of the stocks. Assess the riskiness of the stocks based on standard deviation and the beta.
QUESTION 3 Alan, a chartered financial analyst (CFA), is willing to invest two stocks, Bloom stock and Stars stock. He has collected the data on both stocks from Bursa Malaysia. The data as follows: Stock Stock Bloom Stars State of Probability Return (%) Return (%) Economy Recession Normal 0.35 -20 30 0.40 10 20 Вoom 0.25 70 50 Alan has RM100,000 and he plans to invest RM60,000 in Bloom and the remainder in Stars. The market price for Bloom and Stars are RM12 and RM25 respectively. Beta for each stock is 1.2 and 0.5. Required: C. If Alan decide to invest all 100% in Bloom stock, criticise your findings. D. Evaluate the beta portfolio and each of the stocks. Assess the riskiness of the stocks based on standard deviation and the beta.
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
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QUESTION 3
Alan, a chartered financial analyst (CFA), is willing to invest two stocks, Bloom stock and
Stars stock. He has collected the data on both stocks from Bursa Malaysia. The data as follows:
Stock
Stock
Bloom
Stars
State
of Probability Return (%)
Return (%)
Economy
Recession
0.35
-20
30
Normal
0.40
10
20
Boom
0.25
70
50
Alan has RM100,000 and he plans to invest RM60,000 in Bloom and the remainder in Stars.
The market price for Bloom and Stars are RM12 and RM25 respectively. Beta for each stock
is 1.2 and 0.5.
Required:
C. If Alan decide to invest all 100% in Bloom stock, criticise your findings.
w ww m
D. Evaluate the beta portfolio and each of the stocks. Assess the riskiness of the stocks based on
standard deviation and the beta.
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