mgt201 Assignment no 1 solution Topic covered: Risk and return Risk
and return move side by side and ignoring any one of these two for investment decision can result in the irrational decision. Rational decision making requires investors to analyze the company’s specific risk contribution of investment along with market dynamics. Company-specific risk analysis helps investors to control the unsystematic risk and to come up with a best possible portfolio (a combination of highest return and lowest risk). Market dynamics can over-price or underprice a stock that can be a trap for the investors; Capital Asset Pricing Model (CAPM), Security Market Line (SML) and Gordon’s Formula can help investors to take a rational decision by calculating fair pricing of the stocks. Unlike market risk; investors can control the company’s specific risk if they have calculated the fair price and required rate of return of the available investment options correctly.
Suppose you have to construct a portfolio for which you have considered three different sectors (Textile, Chemical and Food). Stock L and K from Chemical and Food sector have already been selected while one stock is required from the Textile sector to construct the portfolio. Further, information of three Stocks from the textile sector has been provided below, and you need to select only one that can be added to your portfolio.
Dear students, As you know that semester activities have started and load shedding problem is also prevailing in our country. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments or GDBs.
