Contents EXECUTIVE SUMMARY 2 1.1 ORIGIN OF THE REPORT 3 1.2 OBJECTIVES OF THE STUDY 3 1.3 METHODOLOGY USED IN THE STUDY 3 1.4 SCOPE OF THE STUDY 3 1.5 STUDY AREA 4 1.6 LIMITATIONS OF THE STUDY 4 Theoretical Overview 5 2.1 Economy of Bangladesh 7 2.2 Economic outlook 7 Industry Analysis 8 COMPANY ANALYSIS 9 ANALYSIS & INTERPRETATION 9 Conclusion 13 EXECUTIVE SUMMARY Today’s business world is so much competitive as a result every person has to be very cautious while taking an investment
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Compiled by Allan Simiyu for BBM 312 Students only 1 CHAPTER ONE INTRODUCTION 1.1 Introduction Whether a business concern is big or small, it needs finance to fulfill its business activities. Finance may be defined as the art and science of managing money. According to Oxford dictionary, the word ‗finance‘ connotes ‗management of money‘. Webster‘s Ninth New Collegiate Dictionary defines finance as ―the Science on study of the management of funds‘ and the management of funds as the system that
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Midterm Review A few pointers PORTFOLIO THEORY Expected returns • As we talk about annual expected returns, keep in mind what they are: E(D1 ) + E ( P1 ) E(ri ) = -1 P0 E(D1 ) E(P1 ) - P0 = + P0 P0 Risk • As time passes, realized stock prices and dividends may differ from what you expected. • Such future deviations from expectations represent, from today’s perspective, risk. • Standard deviation measures this risk (“average deviation from expectation”). Portfolios • When
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Pricing model concentrates on the analysis of risk in relation to investment return which has long been the problems of classical economic approaches to investment decisions. The market model, which is a complement of the CAPM is considered as a useful theoretical tool to analyze the systematic relationship between the return from a particular security and the overall market return. Such an information provides a general idea on the average fluctuation of return from a security relative to the overall
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uncorrelated D. less than perfectly positively correlated Question 4 A risk-averse investor owning shares in White Corporation decides to add the shares of either Black Corporation or Green Corporation to her portfolio. All three stocks offer the same expected return and total risk. The covariance of returns between White shares and Black shares is –0.05 and White shares and Green shares is +0.05. Portfolio risk is expected to: A. Decline more by buying Black Corporation B. Decline
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errors in these notes, I do not guarantee that they are error-free. 1 Central concepts for this week • Risk-return trade-off • Covariance (between individual assets) • Efficient Frontier • Market portfolio (choice of the rational investor) ↓ • Capital Market Line • Security Market Line • Cost of capital - Firm: the returns that are necessary to attract capital - Investor: returns that the capital markets offers for comparable investments Readings this week: Brealey, Myers & Allen
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‘ Investment Analysis & Portfolio Management Sharpe’s Single Index Model Practice Sheet -2 | |1. Betas of two stocks are 0.73 and 1.20 respectively. If the standard deviation of the market returns is 15.49%, the covariance between | | | |the two stock’s return is | | | |(a) 175.20(%)2 (b) 210.20(%)2 (c) 288.20(%)2 (d) 328.76(%)2 (e) 345.60(%)
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Risk: The danger that the rate of return on a security will be less than the investor expects when purchasing the security, including the possible loss of part or all of the original investment. Efficient frontier: The set of portfolios that have the highest expected return for any given level of risk is known as the efficient frontier. Investors aim to find the efficient frontier which represents portfolios with highest return for a given level of risk. Optimal portfolio: The optimal portfolio
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confines of their domestic economy to enhance return and diversify risks. The investment in stock involves many risks. The investor has to know the exact time to buy and sell a security. The investors have to carry analysis before investing in any stocks. Most of the investors are unaware about the analysis to be carried out before investing. The study involves analysis of earnings per share, price to earnings and analysis of risk through beta value, of the banks in equity market
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20% of the assessment. * 1. The time value of money * Fisher (1930): a dollar today is worth more than a dollar tomorrow * 2. Diversification * Markowitz (1952) and Sharpe (1964): if an investor wants to maximum returns with least risk, diversification is the answer * Tells us how assets are priced * 3. Arbitrage * Modigliani and Miller (1958): if two assets give the same cash flow, they should have the same price * Law of one price Investing
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