BRAC UNIVERSITY

BRAC BUSINESS SCHOOL (BBS)

COURSE:
BUS 526- Financial Systems and Managerial Finance

Topic:
Assignment on Risk & Return

SUBMITTED TO:

Md. Ashadur Rahman Bhuiyan

Section: 01

SUBMITTED BY:

Name ID
Tanvir Mahmud 21164141
Md. Redwanul Islam Rahat 21364094
Ha-meem Ahmad 21364095
Syed Tausif Ahmed
22364054
Revised Price with 21364094 this ID adding “4” with each of the prices

YEAR STOCK A STOCK B MARKET INDEX

STOCK PRICE (4 DIVIDEND STOCK PRICE (4 DIVIDEND INCLUDES DIVS
ADDED TO THE ADDED TO THE GIVEN S
GIVEN VALUE) VALUE)
2022 BDT BDT BDT BDT BDT
37.35 1.60 62.95 1.50 6,307.95
2021 BDT BDT BDT BDT BDT
45.65 2.50 63.50 2.50 8,584.70
2020 BDT BDT BDT BDT BDT
44.50 1.54 64.95 1.55 7,192.98
2019 BDT BDT BDT BDT BDT
43.45 1.75 65.20 2.65 6,244.03
2018 BDT BDT BDT BDT BDT
42.48 2.77 62.70 2.30 7,524.28
2017 BDT BDT BDT BDT BDT
39.73 1.60 60.95 3.60 8,447.00

a)

Year Stock A Annual Return Stock B Annual Return Market Index Annual
Return
2022 -14.68% 1.50% -26.52%
2021 8.20% 1.62% 19.35%
2020 5.96% 1.99% 15.20%
2019 6.43% 8.21% -17.02%
2018 13.89% 6.64% -10.92%
EXPECTED RETURN 19.80% 19.97% -19.92%
AVERAGE RETURN 3.96% 3.99% -3.98%

b) Standard deviation of the returns for Stock A, Stock B, and the Market Index

STDEV
STOCK A ANNUAL RETURN 10.89%
STOCK B ANNUAL RETURN 3.19%
MARKET INDEX ANNUAL RETURN 20.24%

c) Coefficients of variation Stock A, Stock B, and the Market Index.

CV
STOCK A ANNUAL RETURN 0.55
STOCK B ANNUAL RETURN 0.16
 MARKET INDEX ANNUAL RETURN -1.02

d) Scatter diagram graph that shows Stock A’s and Stock B’s returns on the vertical axis and
the market index’s returns on the horizontal axis.

15.00%

10.00%

5.00%

0.00%
-30.00% -20.00% -10.00% 0.00% 10.00% 20.00% 30.00%
-5.00%

-10.00%

-15.00%

-20.00%

Stock A Linear (Stock A) Stock B Linear (Stock B)

e) Stock A’s and Stock B’s betas

STOCK A BETA 0.28

STOCK B BETA -0.06

f) Two Stock’s required returns.

RISK FREE RETURN RATE 0.068

MARKET RISK PREMIUM 0.05
EXPECTED MARKET RETURN 0.118
STOCK A RRR 0.082
STOCK B RRR 0.065

g) If 58% Stock A and 42% Stock B, beta and its required return

YEAR PORTFOLIO
2022 -7.88%
2021 5.44%
2020 4.29%
2019 7.18%
2018 10.85%

BETA 0.28
REQUIRED RATE OF RETURN 8.18%
h) New portfolio’s required return if it consists of 25 percent of Stock A, 15 percent of Stock B, 40
percent of Stock C, and 20 percent of Stock D.

Given
STOCK C BETA 0.985
STOCK D BETA 1.423

BETA FOR NEW PORTFOLIO 0.739

NEW REQUIRED RATE OF RETURN 10.49%