This question is incomplete, the complete question is;
K Co. is a publicly listed company involved in the production of highly technical and sophisticated electronic components for complex machinery. It has a number of diverse and popular products, an active research and development department, significant cash reserves and a highly talented management who are very good in getting products to market quickly.
A new industry that K Co. is looking to venture into is biotechnology, which has been expanding rapidly and there are strong indications that this recent growth is set to continue. However, K Co. has limited experience in this industry. Therefore, it believes that the best and quickest way to expand would be through acquiring a company already operating in this industry sector.
Discussions taken place about the possibility of acquiring Tee Co. being acquired by K Co. Price of Tee company in stock market during last one year are as follows.
Price at the end of month
Month Month end Price KSE 100 INDEX
Jan 175 32600
Feb 185 33900
March 152 33500
April 190 34000
May 195 33500
June 188 33800
July 190 33700
Aug 195 33200
Sep 190 32900
Oct 185 33100
Nov 190 33900
Dec 88 34100
a) Calculate average return for both stock and market
b) Calculate Standard deviation for both
c) Calculate coefficient of variation for both
d) Calculate Beta of stock
Answer:
a) AVERAGE RETURN = -3.69%, 0.42%
b) STANDARD DEVIATION = 19.38%, 1.74%
c) COEFF OF VARIATION = -5.2562, 4.1035
d) BETA = 1.89
Step-by-step explanation:
Month Month-end-Price RETURN KSE-100-INDEX RETURN
Jan 175 32600
Feb 185 5.71% 33900 3.99%
March 152 -17.84% 33500 -1.18%
April 190 25.00% 34000 1.49%
May 195 2.63% 33500 -1.47%
June 188 -3.59% 33800 0.90%
July 190 1.06% 33700 -0.30%
Aug 195 2.63% 33200 -1.48%
Sep 190 -2.56% 32900 -0.90%
Oct 185 -2.63% 33100 0.61%
Nov 190 2.70% 33900 2.42%
Dec 88 -53.68% 34100 0.59%
AVERAGE -3.69% 0.42% =MEAN
RETURN
STANDARD 19.38% 1.74% =STDDEV
DEVIATION
COEFF OF -5.2562 4.1035 =STD/MEAN
VARIATION
VARIANCE 3.76% 0.03% =VAR
COVARIANCE 0.000569039 =COVAR
BETA 1.89 =COVAR / VARIANCE (KSE 100 INDEX)
