An investment analyst estimates the following probabilities of return depending on the state of the economy. Business conditions Boom Good Normal Recession Poor Probability 0.05 0.25 0.40 0.25 0.05 Petronas share return % 12 10 4 -2 -7 Maxis share return % 26 12 8 -6 -22 Berjaya share return % 41 23 12 -27 -55 Compute the expected rate of return and Expected risk of the above shares What are their Shape Ratios? For the above shares if the expected inter correlations are given as follows: Investment in RM millions Weight Correlation Petronas 23 ? 0.15(P,M) Maxis 47 ? 0.25(M,B) Berjaya 40 ? 0.35(B,P) d) Compute Weights e) Compute the expected portfolio return and f) Expected portfolio risk g) Portfolio Sharpe ratio
An investment analyst estimates the following probabilities of return depending on the state of the economy. Business conditions Boom Good Normal Recession Poor Probability 0.05 0.25 0.40 0.25 0.05 Petronas share return % 12 10 4 -2 -7 Maxis share return % 26 12 8 -6 -22 Berjaya share return % 41 23 12 -27 -55 Compute the expected rate of return and Expected risk of the above shares What are their Shape Ratios? For the above shares if the expected inter correlations are given as follows: Investment in RM millions Weight Correlation Petronas 23 ? 0.15(P,M) Maxis 47 ? 0.25(M,B) Berjaya 40 ? 0.35(B,P) d) Compute Weights e) Compute the expected portfolio return and f) Expected portfolio risk g) Portfolio Sharpe ratio
Chapter14: Security Structures And Determining Enterprise Values
Section: Chapter Questions
Problem 1hM
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- An investment analyst estimates the following probabilities of return depending on the state of the economy.
|
Business conditions |
Boom |
Good |
Normal |
Recession |
Poor |
|
Probability |
0.05 |
0.25 |
0.40 |
0.25 |
0.05 |
|
Petronas share return % |
12 |
10 |
4 |
-2 |
-7 |
|
Maxis share return % |
26 |
12 |
8 |
-6 |
-22 |
|
Berjaya share return % |
41 |
23 |
12 |
-27 |
-55 |
- Compute the expected
rate of return and - Expected risk of the above shares
- What are their Shape Ratios?
- For the above shares if the expected inter correlations are given as follows:
|
|
Investment in RM millions |
Weight |
Correlation |
|
Petronas |
23 |
? |
0.15(P,M) |
|
Maxis |
47 |
? |
0.25(M,B) |
|
Berjaya |
40 |
? |
0.35(B,P) |
- d) Compute Weights
- e) Compute the expected portfolio return and
- f) Expected portfolio risk
g) Portfolio Sharpe ratio
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