Answered step by step
Verified Expert Solution
Question
1 Approved Answer
2.1 Following recent publicity around green issues you have decided to concentrate all your wealth on environmentally sustainable assets. You have identified two companies which
2.1 Following recent publicity around green issues you have decided to concentrate all your wealth on environmentally sustainable assets. You have identified two companies which satisfy this strategy, Wind Power Ltd (WPL) and Coastal Wave Ltd (CWL). Your advisors have given the following information on the two companies: Company Expected Return Correlation Standard Deviation Wind Power Ltd 13% 16.7 0.4 9.7 Coastal Wave Ltd 9% You can't make up your mind on how to split your wealth between the two assets; do you simply go for a 50/50 split or perhaps should you choose a minimum variance approach? Required: Calculate the expected return and standard deviation from both these portfolio structures, the equally weighted portfolio and the minimum variance portfolio. Discuss the choices available to you, including which portfolio to choose and why. (17%) 2.2 The company report for Bendine Ltd has indicated a ROE of 22%, a beta of 0.9, and the director statement has confirmed their plans to maintain indefinitely its traditional plowback ratio of 2/3. The report also gave last year's earnings as 1.50 per share. The annual dividend has just been paid. The consensus estimate for the coming year's market return is 20%, and T-bills currently offer a 4% return. Find the price at which Bendine stock should sell. (6%)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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