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Mr. Ramesh Shrestha is the position of senior investment consultant in GEMS Investment Company. Management will plan to invest somehow fund in Stock A. So,

Mr. Ramesh Shrestha is the position of senior investment consultant in GEMS Investment Company. Management will plan to invest somehow fund in Stock A. So, Mr. Shrestha has collected following historical data about Stock A & Market conditions for assessment Risk and return.

Stocks A and the market have the following historical returns:

Year

Returns RA

Returns RM

2018

-15.00%

-8.00%

2019

18.50

20.00

2020

38.67

44.25

2021

14.33

5.45

2022

33.50

28.30

Mr. Shrestha has approached you for help his investment: you required to calculate.

a) Average return performance of Stock A and the market.

b) Risk in terms of standard deviation of returns of Stock A and market.

c)The association of Stock A and market in terms of Covariance.

d) Beta of Stock A and its aggressiveness with respect to market?

e) If risk-free rate of return is 8 percent, compute required rate of return on Stock A

f) Is Stock A overpriced or underpriced or fairly priced?

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