Numerical on Risk and Return

Q.1 Given Inflation rate of return 4% and total Return of 17% on an equity share one-year horizon,
calculate the inflation adjusted real return.

Q.2 Consider a security that was bought at price of Rs. 6000.At the end of year 1 , its price become
Rs. 6550.At the end of 2nd year, its price reached a level 6990 and at the end of third year its price
rose to Rs. 7455. The investor sold security at the end of 4 th year when its price was Rs.7760.
Calculate Average Return.

Q.3 Calculate Arithmetic and Geometric mean:

Year Annual Return (%)

1 100
2 -50

Q.4 Calculate the mean return of following data:

Year Annual
Return(%)
2011 -16.2
2012 3.3
2013 71.9
2014 10.7
2015 36.3
2016 39.8
2017 54.8

Q.5 Calculate Return of Amara batteries Ltd.

Open High Low Close

Year Price Price Price Price
2009 47.5 182.5 30.5 163.2
2010 164.5 228.05 139.65 191.2
2011 190.2 262.15 157.9 203
2012 200.4 430.2 190.1 238.3
2013 238 365.7 207.75 335.9
2014 337 839.65 313.6 822.65
2015 820 1132 778 862.95
2016 867.4 1077 773.05 871.6
2017 870.05 954.55 665.45 840.55
2018 840 907.75 670.65 742.75
2019 743.45 796 572.6 724.5
2020 730 814 350.25 683.15
 Q. 6 Calculate expected return, standard deviation and correlation coefficient of X and Y
Securities.

Event Probability X security return Y security return

1 0.1 14 30
2 0.3 26 28
3 0.4 22 25
4 0.2 10 12

Q.7 Calculate 1. Expected Return Of BPC Ltd. And MKM United

2. Standard Deviation

BPC Ltd. MKM United

(return
Economic Condition Probability %) (return %)
Booming 0.4 20 16
Stable 0.2 10 11
Recessionary 0.4 -8 4

Q.8 ABC Corp Ltd. Costing of Rs. 130 is expected to pay dividend of Rs. 3 at end of year. The possible
price of the stock sell for the end of the year with respective probabilities is as follows:

Possible Price (Rs.) Probability

125 0.1
130 0.1
135 0.2
140 0.3
145 0.2
150 0.1

Calculate expected return and standard Deviation of ABC Corp Ltd.