Question
2. Risk and return estimates (4 marks): a. Use CAPM to estimate the expected return for the shares of: i) your case company ELD; and
2. Risk and return estimates (4 marks):
a. Use CAPM to estimate the expected return for the shares of: i) your case company ELD; and ii) a hypothetical company with a beta of 1.40. To do this, use the yield to maturity of a 10-year Australian Government bond on 29 March 2021 as a proxy for the risk-free rate, assume the market risk premium is 5% and use your case companys current 5-year beta.
b. Using the data from part 2a, estimate portfolio expected return and beta, assuming a portfolio with 20% invested in your case company and the remainder invested in the hypothetical company.
3. Risk and return analysis (15 marks): a. Interpret and discuss your risk and return measures from parts 2a and 2b.
given data: 2a my company ELD beta -0.03 (it is minus 0.03)
hypothetical company beta 1.40
market risk premium is 5%
10 year australian governament YTM is 1.65%
so, expected return for my company is 1.5% and expected return for hypothetical company is 8.65%
given data 2b, portflolio expected return is 7.22% and portfolio beta is 1.11
i want answer for question 3. please
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