Mgt201 GDB SOLUTION FALL 2017
important instructions
- Post your GDB comments (answer) against GDB # 01 rather than against lessons’ MDB.
- Your discussion must be based on logical facts.
- Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.
- Books, websites and other reading material may be consulted before posting your comments; but copying or reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0) even if you provide references.
- Obnoxious or ignoble answer should be strictly avoided.
- Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB.
- Topic:Selection of Stock on the basis of Risk and Return
Discussion Question:
Selection of an efficient stock from the stock market is a crucial decision that is not only vital for investment but also pave the ways for value addition. Stocks are selected on returns and volatility basis that carries a tradeoff. In this context, calculation of required return (RR) with the help of Security Market Line (SML) and stock beta may help a lot to any investor. Assume you are going to invest in stock exchange where you are a new investor and you are facing an issue of the selection of stock among different alternative available in the market. Following information regarding stocks and market is available to you: Based on above information:
You are required to calculate required rate of return of Stock A and Stock B
Declare yourself either a risk taker investor or risk averse investor
Considering your risk appetite (either risk taker or risk averse) you are required to suggest which Stock should be selected. Provide a reason to support your selection (in bullet form). Your selection should be based on your risk appetite assumption i.e. first declare yourself as either risk taker or risk averse investor and then select stock based on calculations in part 1.
Note:
You are required to provide complete calculations along with formulas, otherwise marks will be deducted. Also avoid unnecessary details.
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