Question 3The table below provides the end-of-year share prices (in GB pence) for Centrica plc andNational Express Group plc the end-of-year values for the FTSE 100 Index, which is a proxyfor the market portfolio, M.YEARCentrica plcNational Express Group plcMarket Portfolio, M2002224.7151.5199.5205.8292.6187.43940.420034476.94814.35618.86220.86456.94434.25412.92004337.72005200620072008235.5327.6293.0256.1465.2451.7545.4607.1168.8207.1243.620092010201120122013268.1317.8291.6348.3309.65899.95572.35897.86749.1216.1206.5290.920146566.16242.37142.82015292.5254.92016204.0301.9223.5133.1136.12017337.87687.82018366.2393.96728.17542.42019Source: Yahoo Finance.Required:(a) Calculate the systematic risk (82 x o, the non-systematic risk (o2) – (8? x o?)and the total risk (of) of the equity shares of Centrica and National ExpressGroup.(b) Which company's returns are better explained by the market's returns?(c) Suppose the market is in equilibrium. Assuming the risk-free interest rate of 0.50percent per annum, calculate the expected equilibrium risk-premium for each ofthe two shares. Comment on the results.You must show computations and workings and state assumptions you have madeclearly and neatly.

Risk, - types and measures: Risk refers to the possibility that the actual returns on security are…

Question 3 The table below provides the end-of-year share prices (in GB pence) for Centrica plc and National Express Group plc the end-of-year values for the FTSE 100 Index, which is a proxy for the market portfolio, M. YEAR Centrica plc National Express Group plc Market Portfolio, M 292.6 187.4 337.7 465.2 2002 224.7 3940.4 2003 151.5 4476.9 2004 199.5 4814.3 2005 2006 2007 2008 2009 2010 205.8 5618.8 235.5 451.7 6220.8 545.4 6456.9 4434.2 5412.9 5899.9 5572.3 327.6 293.0 607.1 256.1 168.8 268.1 317.8 207.1 2011 2012 2013 2014 2015 2016 2017 243.6 291.6 216.1 5897.8 206.5 290.9 348.3 6749.1 309.6 292.5 204.0 223.5 6566.1 254.9 6242.3 301.9 7142.8 337.8 7687.8 366.2 393.9 2018 133.1 6728.1 2019 136.1 7542.4 Source: Yahoo Finance. Required: (a) Calculate the systematic risk (B² x o, the non-systematic risk (o²) – (B² × o² and the total risk (o) of the equity shares of Centrica and National Express Group. (b) Which company's returns are better explained by the market's returns?

Question 3 The table below provides the end-of-year share prices (in GB pence) for Centrica plc and National Express Group plc the end-of-year values for the FTSE 100 Index, which is a proxy for the market portfolio, M. YEAR Centrica plc National Express Group plc Market Portfolio, M 292.6 187.4 337.7 465.2 2002 224.7 3940.4 2003 151.5 4476.9 2004 199.5 4814.3 2005 2006 2007 2008 2009 2010 205.8 5618.8 235.5 451.7 6220.8 545.4 6456.9 4434.2 5412.9 5899.9 5572.3 327.6 293.0 607.1 256.1 168.8 268.1 317.8 207.1 2011 2012 2013 2014 2015 2016 2017 243.6 291.6 216.1 5897.8 206.5 290.9 348.3 6749.1 309.6 292.5 204.0 223.5 6566.1 254.9 6242.3 301.9 7142.8 337.8 7687.8 366.2 393.9 2018 133.1 6728.1 2019 136.1 7542.4 Source: Yahoo Finance. Required: (a) Calculate the systematic risk (B² x o, the non-systematic risk (o²) – (B² × o² and the total risk (o) of the equity shares of Centrica and National Express Group. (b) Which company's returns are better explained by the market's returns?

Fundamentals of Financial Management (MindTap Course List)

15th Edition

ISBN:9781337395250

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 22SP

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