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In: Finance

Find 10 years share price and dividends of two Malaysian companies and subsequently answer the questions a, and b below.

Find 10 years share price and dividends of two Malaysian companies and subsequently answer the questions a, and b below. A. Calculate the discretely compounded annual returns and the respective risk for both firms. Analyse your answer. B. Calculate the continuously compounded annual returns and the respective risk for both firms. Which is the better investment of the two? Analyse your answer.

MAYBANK

Years Share price Dividends

2010 MYR 8.500 0.4400

2011 MYR 8.700 0.3600

2012 MYR 8.200 0.3300

2013 MYR 8.880 0.3100

2014 MYR 9.630 0.3300

2015 MYR 8.720 0.3000

2016 MYR 8.580 0.3200

2017 MYR 8.220 0.3200

2018 MYR 10.100 0.3200

2019 MYR 9.540 0.3900

PETRONAS

Years Share price Dividends

2010 MYR 11.100 0.3500

2011 MYR 11.180 0.2500

2012 MYR 15.560 0.3500

2013 MYR 18.560 0.4000

2014 MYR 23.380 0.1500

2015 MYR 22.200 0.1700

2016 MYR 22.880 0.1900

2017 MYR 20.880 0.1900

2018 MYR 17.900 0.2200

2019 MYR 18.080 0.2200

Expert Solution

A. Calculate the discretely compounded annual returns and the respective risk for both firms. Analyse your answer

As PETRONA gives better Dicrete Returns than MAYA bank
Maya bank annual rate of return is 1.17%
Petrona annual rate of return is 5.34%
Sharpe ratio which is measure of risk adjusted return is also high for PETRONA
May bank risk adjusted return is -0.033, which is low
PETRONA risk adjusted return is 0.22

B. Calculate the continuously compounded annual returns and the respective risk for both firms.

As PETRONA gives better Compound Returns than MAYA bank
Maya bank annual rate of return is 1.16%
Petrona annual rate of return is 5.21%
Sharpe ratio which is measure of risk adjusted return is also high for PETRONA
May bank risk adjusted return is -0.036, which is low
PETRONA risk adjusted return is 0.23

As Sharpe ratio- Risk adjusted return is higher for PETRONA, better to invest in PETRONA.

jeff jeffy answered 2 years ago

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