Tybbi ,sapm 1.docx

Admire Classes Q.1. The expected return and Beta of three securities are as follows: Securities X Y Z Expected Return (%) 14.0 14.0 12.0 Beta Factor 1.5 1.4 0.7 If risk free rate is 7% and market return are 12%, which of the above securities are over, under or Correctly, valued in the market? What should be your strategy? Q.2.Statement showing valuation and strategy : Solve the following for Joy Ltd: Particulars Initial Price Bulbul Ltd. 13 Sparrow Ltd. 20 Oriole Ltd 24 Risk free return may be taken at 10%. Q.3. Particulars A Ltd. B Ltd. C Ltd. D Ltd.

Initial Price 25 35 45 1000

Market Price (at the end of the year) (Rs.) 19 25 30

Beta factor

Dividend/Interest Market Price (at the end of the year) (Rs.) 2 50 2 60 2 135 140 1005

1.25 1.00 1.33

Beta factor 0.8 0.7 0.5 0.99

Risk free return may be taken at 14% You are required to calculate: 1. Expected Rate of Return of Portfolio in each using CAPM. 2. Average Return of Portfolio. Q.4.The expected return and Beta of three securities are as follows: Securities X Y Z Expected Return (%) 18.0 11.0 15.0 Beta Factor 1.7 0.6 1.2 If risk free rate is 9% and market return are 14%, which of the above securities are over, under or Correctly, valued in the market? What should be your strategy?