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Please solve with Good explanation. X Co., Ltd., invested on 1.4.2009 in certain equity shares as below: Name of Co. No. of shares Cost (5)
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X Co., Ltd., invested on 1.4.2009 in certain equity shares as below: Name of Co. No. of shares Cost (5) M Ltd. 1,000 (* 100 each) 2,00,000 IN Ltd. 500 ( 10 each) 1,50,000 In September, 2009, 10% dividend was paid out by M Ltd. and in October, 2009, 30% dividend paid out by N Ltd. On 31.3.2010 market quotations showed a value of * 220 and 290 per share for M Ltd. and N Ltd. respectively. On 1.4.2010, investment advisors indicate (a) that the dividends from M Ltd. and N Ltd. for the year ending 31.3.2011 are likely to be 20% and 35%, respectively and (b) that the probabilities of market quotations on 31.3.2011 are as below: Probability factor Price/share of M Ltd. Price/share of N Ltd. 0.2 220 290 0.5 250 310 0.3 280 330 You are required to: (i) Calculate the average return from the portfolio for the year ended 31.3.2010; (ii) Calculate the expected average return from the portfolio for the year 2010-11; and Advise X Co. Ltd., of the comparative risk in the two investments by calculating the standard deviation in each caseStep by Step Solution
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