MAF253 QUIZ 2

UNIVERSITI TEKNOLOGI MARA QUIZ 2 QUESTION a. Al Barra' Falah Bhd plans to invest some of its assets in an artificial intelligence industry as part of diversifying its assets. The company narrowed its choices down to two autonomous vehicles companies, Tesla Inc and Aurora Innovation Inc. The company's investment manager has developed the following estimates of the cash flow for these autonomous vehicles: Tesla Inc Aurora Innovation Inc Probability After-tax cash inflows (RM) Probability After-tax cash inflows (RM) 0.10 100,000 0.20 150,000 0.20 150,000 0.30 200,000 0.40 300,000 0.40 300,000 0.20 450,000 Required: 1. Determine the standard deviation for each of the companies. (9 marks) ii. Advice which company should Al Barra' Falah Bhd invest in and why? (3 marks) iii. If Al Barra' Falah Bhd's, investment manager is a risk taker, which company will he invest in? (Give reason for your answer (1 mark) b. Akhtar Bhd has a beta coefficient of 1.50. Calculate the required rate of return for Akhtar Bhd. If the risk-free rate is 3.5% and the market return is 7.2%. (2 marks) (Total: 15 marks)