You just graduated with MBA in Accounting and Finance from the University of Professional Studies and are employed by JEK Investments Ltd, a brokerage firm in Ghana. Kweku The Don, an illiterate businessman, visited your firm for a piece of investment advice and possibly make some investments. Although an accomplished businessman, he was advised by hisson to buy some shares on the Ghana Stock Exchange in other to diversify his portfolio. Your boss has asked you to consider either Cronox Industries or Zealous Incorporated The share prices and dividends for the two companies and the returns on the Ghana Stock Exchange are shown below for the period 2016– 2021. Cronox Industries Zealous Incorporated Year Stock price Dividend (GH¢) Stock price Dividend (GH¢) GSE Returns (Market Returns) 2016 7.62 - 55.75 - - 2017 12 0.90 60.00 2.25 0.07 2018 10.75 0.95 57.25 2.50 0.12 2019 17 1.00 48.75 2.75 0.08 2020 15.75 1.06 52.30 2.90 0.23 2021 17.25 1.15 48.75 3.00 0.18 g. Calculate the covariance and the correlation coefficient between the two stocks h. Assuming Kweku the Don wants to invest the same amount in each of the stocks, what will be his portfolio risk and portfolio return i. Compute the beta for both Cronox and Zealous
You just graduated with MBA in Accounting and Finance from the University of Professional Studies and are employed by JEK Investments Ltd, a brokerage firm in Ghana. Kweku The Don, an illiterate businessman, visited your firm for a piece of investment advice and possibly make some investments. Although an accomplished businessman, he was advised by hisson to buy some shares on the Ghana Stock Exchange in other to diversify his portfolio. Your boss has asked you to consider either Cronox Industries or Zealous Incorporated The share prices and dividends for the two companies and the returns on the Ghana Stock Exchange are shown below for the period 2016– 2021. Cronox Industries Zealous Incorporated Year Stock price Dividend (GH¢) Stock price Dividend (GH¢) GSE Returns (Market Returns) 2016 7.62 - 55.75 - - 2017 12 0.90 60.00 2.25 0.07 2018 10.75 0.95 57.25 2.50 0.12 2019 17 1.00 48.75 2.75 0.08 2020 15.75 1.06 52.30 2.90 0.23 2021 17.25 1.15 48.75 3.00 0.18 g. Calculate the covariance and the correlation coefficient between the two stocks h. Assuming Kweku the Don wants to invest the same amount in each of the stocks, what will be his portfolio risk and portfolio return i. Compute the beta for both Cronox and Zealous
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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Question
You just graduated with MBA in Accounting and Finance from the University of Professional Studies and are employed by JEK Investments Ltd, a brokerage firm in Ghana. Kweku The Don, an illiterate businessman, visited your firm for a piece of investment advice and possibly make some investments. Although an accomplished businessman, he was advised by hisson to buy some shares on the Ghana Stock Exchange in other to diversify his portfolio. Your boss has asked you to consider either Cronox Industries or Zealous Incorporated The share prices and dividends for the two companies and the returns on the Ghana Stock Exchange are shown below for the period 2016– 2021.
|
|
Cronox Industries |
Zealous Incorporated |
|
||
|
Year |
Stock price |
Dividend (GH¢) |
Stock price |
Dividend (GH¢) |
GSE Returns (Market Returns) |
|
2016 |
7.62 |
- |
55.75 |
- |
- |
|
2017 |
12 |
0.90 |
60.00 |
2.25 |
0.07 |
|
2018 |
10.75 |
0.95 |
57.25 |
2.50 |
0.12 |
|
2019 |
17 |
1.00 |
48.75 |
2.75 |
0.08 |
|
2020 |
15.75 |
1.06 |
52.30 |
2.90 |
0.23 |
|
2021 |
17.25 |
1.15 |
48.75 |
3.00 |
0.18 |
g. Calculate the covariance and the correlation coefficient between the two stocks
h. Assuming Kweku the Don wants to invest the same amount in each of the stocks, what will be his portfolio risk and portfolio return
i. Compute the beta for both Cronox and Zealous
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