Risk and Return Problems and Solutions
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Problem 1:
On the basis of expected Rate, Standard Deviation, Variance and Coefficient of variation decided which of the following company is best for investment (Single company Risk analysis).
Solution:
On the basis of above mention risk indicators Company H is best.
Problem 2:
Following are the probability distribution of returns of portfolio of Stock A and Stock B in equal proportion of weight in each state of economy. You are required to calculate Expected Return and Risk for individual Stocks?
Solution:
Answer: 14.14
Answer: 14.14
Problem 3:
If you deposit Rs. 1,000 in the bank at a nominal interest rate of 6 percent, you will have Rs. 1,060 at the end of the year. Suppose that the inflation rate during the year is also 6 percent. Find real amount in Rupees?
Solution:
Answer: Rs. 1,000
Problem 4:
You save Rs. 100 and invest it at a nominal interest rate of 8%. Given the expected inflation is 5% per year, what is the real rate of return?
Solution:
Answer: 2.87%
Problem 5:
Suppose the current market value of Rs. 100 and no dividend income after one year. Find expected Rate of Return?
Solution:
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