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Hi, whow to find expected return and standard deviation ? as well as question b to d You have the characteristics and historical prices of
Hi, whow to find expected return and standard deviation ? as well as question b to d
You have the characteristics and historical prices of the following two companies (A and B), and have estimated their relations to the wider market, detailed below: Company A Company B Current dividends per share (just paid) $0.38 $1.30 Growth in dividends 2% 4% Beta 0.8 1.3 Date 2016 2017 2018 2019 Share Price A $6.44 $6.24 $8.02 $8.10 Share Price B $20.45 $21.94 $19.76 $23.88 Other information: Current risk-free rate of return: 2% p.a. Current return on market portfolio: 8% p.a. a) Calculate the expected return and standard deviation for share A and B. b) Calculate the required return for share A and B. given their risk characteristics. c) Discuss the relationship between the expected return, from part a) and the required return, from part b) in the context of whether or not you would recommend investing in the share d) Calculate the intrinsic value of Company A's and B's shares. Based on your calculated intrinsic value, identify whether you would buy or sell the shares, using the 2019 share price for each share as a reference value. Provide justification for your decisionStep by Step Solution
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