Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please do asap Fortiga, who was widower and issueless, had left his substantial wealth as legacy to his nephew and niece through a will. Detailed
Please do asap
Fortiga, who was widower and issueless, had left his substantial wealth as legacy to his nephew and niece through a will. Detailed instructions had been left on how the estate should be shared between the two, once both of them attained the age of majority. A week before his demise he had taken a fancy to the capital market and had invested a sizeable amount in equity shares, specifically, Rs.6 million in Magnesium Pharma, Rs.4.8 million in Calcium Industries and Rs. 1.2 million in B6 Limited. As the partition among the siblings had to wait for at least one more year as the girl was still a minor, the portfolio of shares had to be maintained as they were for the time being. The will had entrusted the job of administering the estate for the benefit of the beneficiaries and partitioning in due course to the reputed firm of Chartered Accountants, Pit Bull. Meanwhile the young beneficiaries were very eager to know certain details of the securities and had asked the senior partner of the firm to brief them in this regard. For this purpose, the senior partner has asked you to prepare a detailed note to him with calculations, to answer the following possible doubts. You find that out the three stocks, your firm has already been tracking two viz. Magnesium Pharma (A) and Calcium Industries (B)-their betas being 1.2 and 0.8 respectively. Further, you have obtained the following historical data on the returns of B6 Limited (C): Period Market Return % Return's on B6 Limited % 1 8 10 2 (6) 8 3 12 25 4 10 (8) 5 9 14 6 9 11 On the future returns of the three stocks, you are able to obtain the following forecast from a reputed firm of portfolio managers State of Probability Returns in Percentage the Economy Treasury Magnesium Calcium B6 Ltd Nifty Bills Pharma Industries Recession 0.2 6 (10) 8 15 (8) Normal 0.4 6 18 6 15 Boom 0.4 6 30 20 (10) 25 12 a. Calculate the beta of B6 Limited stock from the historical data (4 Marks) b. Calculate the expected returns, standard deviations of Magnesium Pharma, Calcium Industries, B6 Ltd and Nifty. (8 Marks)
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