Ms Mitrika an analyst at Aasheesh Securities Ltd. is considering the stocks of Aftek Ltd. And Paraan Ltd. For investment. Expected returns on these stocks depend on the growth rate GDP. The conditional returns of the market and the stocks are given below: Economic Scenario Probability Return on (%) Return on GDP growth rate market % Aftek Ltd. Paraan Ltd. 1.00 - 3.00% 0.18 15 9 3.00 - 6.00% 0.24 25 14 11 6.00 - 8.00% 0.26 38 27 18 More than 8.00% 0.32 46 33 25 The expected risk-free return is 6.5% Assume that CAPM holds well in the market You are required to i) Calculate the ex-ante-betas for the two stocks. ii) Find out whether the stocks of Aftek Ltd. And Paraan Ltd. Are underpriced or overpriced. iii) Calculate the proportion of systematic risk and unsystematic risk for both the companies. iv) Determine which stock the analyst would suggest to invest.

Ms Mitrika an analyst at Aasheesh Securities Ltd. is considering the stocks of Aftek Ltd. And Paraan Ltd. For investment. Expected returns on these stocks depend on the growth rate GDP. The conditional returns of the market and the stocks are given below: Economic Scenario Probability Return on (%) Return on GDP growth rate market % Aftek Ltd. Paraan Ltd. 1.00 - 3.00% 0.18 15 9 3.00 - 6.00% 0.24 25 14 11 6.00 - 8.00% 0.26 38 27 18 More than 8.00% 0.32 46 33 25 The expected risk-free return is 6.5% Assume that CAPM holds well in the market You are required to i) Calculate the ex-ante-betas for the two stocks. ii) Find out whether the stocks of Aftek Ltd. And Paraan Ltd. Are underpriced or overpriced. iii) Calculate the proportion of systematic risk and unsystematic risk for both the companies. iv) Determine which stock the analyst would suggest to invest.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter5: Business And Economic Forecasting

Section: Chapter Questions

Problem 8E: Bell Greenhouses has estimated its monthly demand for potting soil to be the following: N=400+4X...

See similar textbooks

Similar questions

Use this method, Exponential decline model, to solve ( in petroleum economics) The production of the oil well decline exponentially, the initial flow rate is 1500 STB/day, the production rate of this well become 120 STB/day in the fourth year, find the production rate after 25 months from the beginning, find yearly production and production rate for this well for the next 4 years?
Q6 Suppose that at time t=0, half of a "logistic" population of 100000 persons have heard a certain rumor and that the number of those who have heard it is then increasing at the rate of 500 persons per day. How long will it take for this rumor to spread to 80% of the population? ( Suggestion: Find the value of k by substituting P(0) and P'(0) in the logistic equation) a. About 98 days b. About 34 days c. About 19 days d. About 69 days e. About 119 days
Asap plz 15) International firms will invest in less developed countries at the beginning of their production life cycle, but as production is standardized and sold mainly on prices, they shift production to developed countries.Select one:O TrueO False
A town with a population of 20 000 loses residents at a rate of 0.4% per month because of a poor economy. Create an exponential function of the form Q = Qo * (1 + r)t (where r > 0 for growth and r < 0 for decay) to model the situation described. ANSWER: Q =Complete the table showing the value of the quantity, Q, for the first 5 units of time of decay. MONTH RESIDENTS0 20 0001 2 3 4 5
Q. Due to global uncertainty and geopolitical impact and anticipating recession in the waster countries, it is assumed that HUL may delivery the return based on the Indian Economic Condition. RBI projected the Indian Economic growth as follows. Projected Indian Economic Condition Probability of occurrence Possible Return from HUL (in %) Extremely Good 10% 22% Good 20% 18% Average 40% 15% Poor 20% 8% Severely Poor 10% 4% In this situation, if we invest in HUL, how much return can be expected? Also, suggest the possible risk involved in this investment.
firm decides to invest X units of capital in Project A and Yunits of labour in Project B. iv. The expected return for each unit of investment is $500 in Project A and $1500 in Project B. However in order to meet the expectations of the firm's ethical and environmental policy values of X and Y must satisfy the constraint x+y-5x-6y= 210. How many units of each type should firm buy in other to maximize total volume? What is the implication of a unit change in investment in capital and (or) Labour Economic Analysis?
In the past four years, the annual returns of one company’s stockare 12%, 18%, and –14%, and 7%.a) What is the geometric average return? b) What is the arithmetic average of the returns? c) According to an economist’ forecast on the Year 2020, the probabilities of repeatingthe performances of the former four years are 30%, 30%, 20%, and 20%, respectively.What is the expected return of the stock in the Year 2020
edian household incomes tend to increase from one year to the next. In 2019, the median household income was $64,101 in Madison, Wisconsin, and $42,087 in Milwaukee. In 2020, the median household incomes were $66,847 in Madison and $44,192 in Milwaukee. Find the absolute and relative changes for median household incomes in Madison and Milwaukee from 2019 to 2020. Give any percentage values rounded to the nearest tenth of a percent and dollar values to the nearest whole dollar amount. (a) From 2019 to 2020, the absolute change for median household income in Madison was$ . (b) From 2019 to 2020, the relative change for median household income in Madison was %. (c) From 2019 to 2020, the absolute change for median household income in Milwaukee was$ . (d) From 2019 to 2020, the relative change for median household income in Milwaukee was %. Use the "Add Work" button to show your work and thought process for these calculations. You may type
Given that Costa Rica has 12.1 mean years of school, the minimum years of school is 0, and the maximum years of school is 13.3. Also, Costa Rica has 15.2 expected years of schooling, the minimum years of schooling is 0, and the maximum years of expected schooling is 18. The minimum education index is 0 and the maximum education index is 0.971. What is the education index for Costa Rica for NDHI? Please show your work.
No hand written solution and no img Consider the following information for a period of years: Arithmetic Mean Long-term government bonds 7.5% Long-term corporate bonds 7.6 Inflation 4.4 What is the real return on long-term government bonds? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. What is the real return on long-term corporate bonds? long term government bond: ? long term corporate bonds: ?
If real GDP for 2009 is $6400 billion (in 2012 dollars) and nominal GDP for 2010 is $6/20 billion, then the growth rate of real GDP ix Select one a .5% b.0.5% c unknown based on the given information d. 0%.
A university student recieved $1,000 upon graduation at age 20 years. This person washired by one of the largest global petrochemical companies soon after graduation withan expected annual income of $250. Assume that the retirement age is 65 years andlife expectancy is 85 years in the country in which the student resides. Given that thiscountry has zero real interest rate and consumption smoothing is optimal for allindividuals:a. Derive an expression for the person’s average propensity to consume.b. State in one sentence how the consumption puzzle is addressed