This paper circulates around the core theme of 1. Using the information given in Exhibit 1, determine expected return for each investment for the next period. In addition, find the standard deviation of return for each investment. together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 96. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
1. Using the information given in Exhibit 1, determine expected return for each investment for the next period. In addition, find the standard deviation of return for each investment.
2. Using your answer to 1, above, and assuming that investors can only invest in one of the three alternatives in Exhibit 1, use expected return and standard deviation to determine which alternative would be the most appropriate for a risk-averse investor. Justify your method of selection using the numerical data (compare risk to return).
3. Calculate the correlation coefficient between Infinite and Constant, Infinite and Variable and Constant and Variable shares using the probability data in Exhibit 1. What do these results suggest in terms of diversification?
4. Determine the expected return and standard deviation of a two-asset portfolio comprised of Infinite and Constant shares, Infinite and Variable shares, and Constant and Variable shares. Assume equal weightings of each share within each portfolio. Are these portfolios more efficient than holding a single asset? Explain your answer with the use of numerical data.
5. Determine the expected return and standard deviation of a three-asset portfolio comprised of Infinite, Constant and Variable shares. Assume equal weightings of each share within the portfolio. Why is the computation more complex than a portfolio comprising of only two shares? Justify numerically how risk has further reduced from a 2-asset portfolio to a 3-asset portfolio.
6. Use the numbers in Exhibit 2 to determine the average return, variance and standard deviation for Integrity Ltd, Natural Resources Ltd and the Market index.
7. Use the numbers in Exhibit 2 to determine the systematic risk (Beta) of both Integrity and Natural Resources Ltd. Provide an interpretation of your results? What exactly does Beta measure and how does it differ from standard deviation?
8. Use the capital asset pricing model to calculate the required rate of return for both Integrity and Natural Resources Ltd. Assume the risk-free rate of return is 3%. What is the required rate of return and what function does it serve as part of the valuation process?
9. Utilising the required rates of return calculated in question 8 above and the historical dividend information in exhibit 3; calculate the present value for both companies using the dividend valuation model. State any assumptions regarding future dividend patterns that you have made and