Question
In: Finance
You possess the following three securities in a portfolio with their respective Beta values noted. Name...
You possess the following three securities in a portfolio with their respective Beta values noted.
|
Name |
Beta |
Percentage of portfolio |
|
OKA Ltd |
1.7 |
25% |
|
Techno Ltd |
0.9 |
37.5% |
|
Dynamic Ltd |
1.1 |
37.5% |
Analyse and interpret the Beta values of each of the companies offering insight into the risk of each firm as represented by their Beta values. Which firm has provided the highest returns historically when the market has been performing well, all things being equal?
Solutions
Expert Solution
Beta is measure of systematic risk of the stock and indicates it’s volatility in comparison of market. If beta is near to one this indicates that the stock moves with the market and lower beta means that the stock is less volatile than market. Higher beta indicates that stock is more volatile than the market. Therefore volatility of securities Techno Ltd (beta 0.9) Dynamic Ltd (beta 1.1) is near to market index as their beta is near to 1. But for security OKA Ltd beta is 1.7 which is more than 1 therefore it will fluctuate more in comparison of the market. The security OKA will be more volatile and has the potential of higher return. Therefore we can assume that company OKA has provided the highest returns historically when the market has been performing well, all things being equal and it is good for aggressive investment.
jeff jeffy answered 2 years agoRelated Solutions
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(Leave no cells blank - be certain to enter 0 wherever
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a. Fill in the missing values in the table.
(Leave no cells blank - be certain to enter 0 wherever
required. Do not round intermediate calculations and round your
answers to 2 decimal places, e.g., 32.16.)
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Return
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(Leave no cells blank - be certain to enter 0 wherever
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_____
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_____
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