Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Question 5 Risk and Return PASS Ltd., is a publicly listed Australian company that your client is following closely. The historical price of PASS Ltd.
Question 5 Risk and Return PASS Ltd., is a publicly listed Australian company that your client is following closely. The historical price of PASS Ltd. is given below. Australian Treasury bills currently pay a return of 4% p.a., the stock market return over the same period averaged 10% p.a., and have calculated the standard deviation of the market returns to be 12% p.a. PASS Ltd. beta is estimated at 1.40. Lastly, you have identified the historical returns and dividends (below). Year Price Dividend 1 2 $0.30 3 4 $0.35 $3.60 $3.25 $3.65 $4.50 $4.45 $4.68 $5.21 $6.01 5 6 $0.45 7 8 $0.50 Using the above information, identify whether it is a good idea, for your client, to invest in PASS. Explain your reasoning for your decision in relation to expected rate of return, required rate of return, and standard deviation Question 5 Risk and Return PASS Ltd., is a publicly listed Australian company that your client is following closely. The historical price of PASS Ltd. is given below. Australian Treasury bills currently pay a return of 4% p.a., the stock market return over the same period averaged 10% p.a., and have calculated the standard deviation of the market returns to be 12% p.a. PASS Ltd. beta is estimated at 1.40. Lastly, you have identified the historical returns and dividends (below). Year Price Dividend 1 2 $0.30 3 4 $0.35 $3.60 $3.25 $3.65 $4.50 $4.45 $4.68 $5.21 $6.01 5 6 $0.45 7 8 $0.50 Using the above information, identify whether it is a good idea, for your client, to invest in PASS. Explain your reasoning for your decision in relation to expected rate of return, required rate of return, and standard deviation
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