a) Beth invested in equity shares of company X at the price of Ksh. 100 per share. During the year, company X paid a dividend per share of Ksh 10 and the price of the share at the end of the year was Ksh 115. Compute the return of the share

(3 marks)

b) MarkwantstoinvestinsharesattheNairobisecuritiesexchangemarketbutheis not sure on the best approach. Advice Mark on how he can apply the fundamental

approach to achieve his objective (4 marks)

c) The table below contains information on the expected return and standard deviation of

three securities, A, B and C.

Security A

B

C

Expected return (%) Standard deviation (%) 10 7

15 9

20 10

An investor wants to choose any one of the following three options:

I) Investing entirely in security A

II) Investing entirely in security B

III) Investing 50% of the amount in security A and 50% in security C. Correlation

coefficient between the returns of security A and C is 1.

Required

i) Determine the coefficient of variation for each of the three options

(6 marks)

ii) Recommend the best option for the investor (2 marks)