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K Co. is a publicly listed company involved in the production of highly technical and sophisticated...

K Co. is a publicly listed company involved in the production of highly technical and sophisticated electronic components for complex machinery. It has a number of diverse and popular products, an active research and development department, significant cash reserves and a highly talented management who are very good in getting products to market quickly.

A new industry that K Co. is looking to venture into is biotechnology, which has been expanding rapidly and there are strong indications that this recent growth is set to continue. However, K Co. has limited experience in this industry. Therefore, it believes that the best and quickest way to expand would be through acquiring a company already operating in this industry sector.

Discussions taken place about the possibility of acquiring Tee Co. being acquired by K Co. Price of Tee company in stock market during last one year are as follows.

Price at the end of month

Month

Month end Price

KSE 100 INDEX

Jan

175

32600

Feb

185

33900

March

152

33500

April

190

34000

May

195

33500

June

188

33800

July

190

33700

Aug

195

33200

Sep

190

32900

Oct

185

33100

Nov

190

33900

Dec

88

34100
  1. Calculate average return for both stock and market
  2. Calculate Standard deviation for both
  3. Calculate coefficient of variation for both
  4. Calculate Beta of stock
  5. Suggest what you understand from Beta

Solutions

Expert Solution

1. Beta of stock is 2.07 which specifies that the stock will 2.07 times the movement in the stock index either upwards or downwards

*Please comment if you face any difficulty and please don't forget to provide positive rating*

jeff jeffy answered 1 year ago
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