Calculation of systematic risk (Beta)

Q1. Following information is available with respect to market index and share price of ABC Ltd.
year
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Find out the of the shares of ABC Ltd.

Index
218
230
248
250
282
297
288
290
320
356
371

Share price
10.90
12.00
13.30
14.00
18.00
19.90
18.10
19.80
22.50
25.50
28.00

Q2. Following information is available in respect of a security(S) and the market portfolio (M).
Probabilities

Return %

.3
.4
.3
Find out the of the security.

S (security return)
10
16
32

M (market return)
11
20
19

Q3. The rates of return on a security of company X and market portfolio for 10 periods are given below:
Period
1
2
3
4
5
6
7
8
9
10
(i)
(ii)

Return of security X (%)

20
22
25
21
18
-5
17
19
-7
20
What is the beta of security X?
What is the characteristic line for security X?

Return on market portfolio (%)

22
20
18
16
20
8
-6
5
6
11

Q4. Given below is information of rates of return of market and two companies A and B:
Market (%)

2010
12.0

2011
11.0

2012
9.0

Company A (%)
13.0
11.5
Company B (%)
11.0
10.5
Determine the beta coefficients of the shares of company A and Company B.

9.8
9.5

Portfolio theory: Portfolio Analysis

Q1. An investor is holding shares of A ltd, b ltd and C ltd. worth Rs. 3,00,000; Rs.3,00,000 and Rs.
4,00,000 respectively. The expected returns are 10%, 8% and 12%. What is the expected return on this
portfolio?
Q2. Following are the returns from two securities over a period of 6 years. Find out the covariance
between their returns
Security
A
B

Year 1
.20
.60

Year 2
-.30
-.20

Year 3
.20
.30

Year 4
.20

Year 5
-.15

Year 6
.10

Q3. Calculate the expected return and standard deviation of the investments A and b. What will be the
return if the total investment is divided one half in each?
Economic climate

Probability

Dull
0.2
Stable
0.5
Growth
0.3
Calculate the variance and covariance.

A%
10
14
20

Return
B%
6
15
11

Q4. Two securities A and B have variance of 13 and 12 and expected returns of 15% and 12%
respectively. The co-variance between the returns is 3. Find
A
B
out the risk and return of following portfolios:
0.2
0.8
0.7
0.3
0.5
0.5
Q5. Returns on shares of ABC Ltd. and PQR Ltd. for the past two years are as follows:
ABC ltd.
PQR Ltd.
Calculate the following:
(a)
(b)
(c)
(d)
(e)
(f)

Year 1
11%
20%

Year 2
17%
8%

Expected return of portfolio is made up of 50 per cent of ABC Ltd. and 50% of PQR Ltd.
Expected return of portfolio is made up of 60% of ABC Ltd and 40% of PQR Ltd.
Standard deviation of each stock.
Covariance and coefficient of correlation between the two.
Portfolio risks if both are invested in the ratio of 2:1.
Overall portfolio risk if the ratio of investment is 1:1.