GDB solution for MGT201. Financial managemnet

MGT201 GDB Solution

Your neighbor is a security analyst. He has conducted his research about some

stocks in Karachi Stock Exchange (KSE) and his findings are as follows:

Stock A will have a return of 18%, stock B will have a return of 20 % and stock C

will have a return of 22%, but his findings do not involve the CAPM (Capital

Asset Pricing Model).

You are a business graduate and when you have used CAPM, you have come to

know that:

Stock A’s expected return is 15.50%, Stock B’s expected return is 24.63% and

Stock C’s expected return is 25.39%.

In your opinion, whether the KSE has over-priced or under-priced each stock

and in the light of these results, which of these stocks are suitable for

investment?

Solution

It is just idea….do not copy it just takes

idea and makes your own….

KSE Return:

Stock A : 18% ------> 15.50%

Stock B : 20% ------> 24.63%

Stock C : 22% ------> 25.39%

for A KSE is over prized

&

for B, & C KSE has under prized.

In my opinion Stock A is more suitable for investment then B or

C. It has more return 18% then compared to 15.50%...