Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Kafue Sugar and Dangote Cement are listed companies on the Lusaka Stock Exchange in Zambia. They have been trading on the exchange for the last
Kafue Sugar and Dangote Cement are listed companies on the Lusaka Stock Exchange in Zambia. They have been trading on the exchange for the last five years. The performance of the returns for the last five years to 2013 is shown in the table below YearStock A's Returns Stock B's Returns 2009 2010 2011 2012 2013 18% 33% 15% 0.5% 27% 14.5% 21.8% 30,5% 5% 26.3% (i) Calculate the average return that two investors could have earned for Kafue Sugar and Dangote Cement if they held these stocks for the last five years. (6 marks) (ii) Assume that someone held a portfolio of 50 percent in Kafue Sugar and 50 percent in Dangote Cement. What would have been the realized rate of return on the portfolio in each year from 2009 through to 2013? What would have been the average return on the portfolic as a whole during this period? (6 marks) (iii)Calculate the standard deviation of returns for each stock and for the portfolio. Interpret the findings to an investor holding such a portfolio. (7 marks) (6 marks) Total (25 marks) (iv)By comparing the coefficient of variation of the two stocks, which of the two stocks has a higher investment risk? Explain why
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started