Reference no: EM133138691
Question - RJ Franks Pte Ltd has the following distributions:
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Demand for Products
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Probability
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Rate of return if this demand occurs
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Weak
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0.2
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-30%
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Below average
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0.1
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-10%
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Average
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0.3
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15%
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Above average
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0.1
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20%
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Strong
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0.3
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40%
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a) Calculate the stock's expected return.
b) Tom Skinner has $45,000 invested in a stock with a beta of 0.8 and another invested in a stock with beta of 1.4. There are only 2 investments in his portfolio. What is his portfolio beta?
c) What do you understand by the term 'beta'?
d) Roadwall Inc is considering a capital budgeting project that has an expected return of 5% and a standard deviation of 20%. What is the project's coefficient of variation?
e) What are the differences between standard deviation and coefficient of variation for portfolio theory citing an own example of each?
f) In your opinion, why do stakeholder prefer portfolio than standalone investment? Give 2 reasons.
g) The capital asset pricing model (CAPM) measures the expected return.
Report of not exceeding 800 of explaining this model citing your own example. Your report should include systematic and unsystematic risk.
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Create relationships and experiences
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What is the required return on your portfolio
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What do you understand by the term beta
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