Stocks rate of return, Business Economics

Assignment Help:

Question 1:

(a) There are few, if any, real companies with negative betas. But suppose you found one with β= -0.25. How would you expect this stock's rate of return to change if the overall market rose by an extra 5 percent? What if the market fell by an extra 5 percent?

(b) You have Rs1 million invested in a well-diversified portfolio of stocks. Now you receive an additional Rs. 20,000 bequest.

Which of the following actions will yield the safest overall portfolio return?

(i) Invest Rs. 20,000 in Treasury bills (which have β = 0).
(ii) Invest Rs. 20,000 in stocks with β = 1.
(iii) Invest Rs. 20,000 in the stock with β = -0.25.

(c) Diversification has enormous value to investors, yet opportunities for diversification should not sway capital investment decisions by corporations. How would you explain this apparent paradox?


Related Discussions:- Stocks rate of return

General agreement on tariffs and trade (gatt), General Agreement on T ...

General Agreement on T arif fs and Trade (GATT) A multilateral treaty, the basic goals of which are: (1) to liberalize and promote world trade via multilatera

Demand and supply, discuss the concept of demand for the products that are...

discuss the concept of demand for the products that are being consumed by the different consumers

Scan factors., Assess the current environmental scan factors that are relev...

Assess the current environmental scan factors that are relevant to the decision making process. Determine the factors that will have the greatest impact on plant operations and man

Railways economics, AsEvaluate the implications of implementing this ideal ...

AsEvaluate the implications of implementing this ideal product mix in Transnet Freight Rail.

What are the processes of industrialisation for productivity, What are the ...

What are the processes of industrialisation for productivity? The process of industrialisation increases productivity and per capita incomes and includes: a. Urbanisation

What are characteristics of growth in developed countries, What are the cha...

What are the characteristics of growth in developed countries? Simon Kuznets specified some characteristics for all DCs (developed countries) as illustrated below: • Gross

Economic principle, #questDuring the 1990s, technological advance reduced t...

#questDuring the 1990s, technological advance reduced the cost of computer chips. Explain, with the use of supply and demand diagrams, how the following markets are affected in ter

The causes and persistence of inflation, QUESTION (a) Analyse the activ...

QUESTION (a) Analyse the activist and non-activist policy makers' choice between implementing a policy rule or a discretionary monetary policy. (b) Explain why the policy ru

Economics for business, Case study CORN is now struggling to keep up wi...

Case study CORN is now struggling to keep up with demand.  With corn supplies the tightest they have been since the mid-1990s, prices have risen substantially and are holding a

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd