Question: Tasks for Case Study:
1 a) Using the data in the spreadsheet you have downloaded, calculate:
(1) the historical monthly rates of return for the market index only (monthly rates of return for the companies are given); and
(2) the historical average rate of return and standard deviation of returns for:
i) your case company;
ii) the reference company; and
iii) the market index.
b) Calculate portfolio historical average rate of return and standard deviation assuming a portfolio of equal weighting for your case company and the reference company.
c) Use CAPM to estimate the expected return for the shares of:
1) Your case company; and
2) The reference company as at 28 February 2018. To do this, use the yield to maturity on that date of a 10-year Australian Treasury bond as a proxy for the risk-free rate, assume the market risk premium is 6.6% and use the company's current beta. Assume that the reference company has a negative beta of -0.20.
d) Using the data from part c, calculate the portfolio expected return and beta, again assuming equal weights for the two companies.
e) Drawing on expectations from theory and incorporating the overall context of your chosen company, discuss the risk and return measures you have calculated.
Note: The remaining five (5) marks are allocated to presentation and written expression of the analysis.
Information related to above question is enclosed below:
Attachment:- Casestudy1details2.rar