Problem 1:

Mr. Ravi purchased 100 shares of Rs.10 each of Radheshyam Ltd. in 2013 at Rs.78 per share. The
company has declared a dividend @ 40% for the year 2015-16. The market price of share as at 1-4-2015
was Rs.104 and on 31-3-2016 was Rs.128. Calculate the annual return on the investment for the year
2015-16.

Solution:

Dividend received for 2015-16 = Rs.10 x 40/100 = Rs.4

Calculation of Annual Rate of Return on Investment for the Year 2015-16:

The rate of return can also be calculated for a period of more than one year. The average rate of return
represents the average annual rates of return over a period of years.

The formula used for calculation of average rate of return is given below:

Where, R̅ = Average rate of return

n = Total number of periods

Problem 2:

The average market prices and dividend per share of High-Tech Securities Ltd. for the past 6 years are
given below:

Calculate the average rate of return of High-Tech Securities Ltd. Shares for the past 6 years.
Problem 3:

The rate of return of equity shares of Karan Steels Ltd. for past six years are given below:

Calculate the average rate of return, standard deviation, and variance.

Solution:

Calculation of Average Rate of Return (R̅ ):

Problem 1:

Anand Ltd.’s share gives a return of 20% and Vinod Ltd.’s share gives 32% return. Mr. Kumar invested 25%
in Anand Ltd. shares and 75% of Vinod Ltd. shares. What would be the expected return of the portfolio.

Solution:

Σ(RP) = WA(RA) + WB(RB)

Where, Σ(Rp) = Expected return from a portfolio of two securities

WA = Proportion of funds invested in Security A

WB = Proportion of funds invested in Security B

RA = Expected return of Security A

RB = Expected return of Security B

WA + WB = 1

Portfolio Return = 0.25 (20) + 0.75 (32) = 29%

Problem 2:

Mr. Kapoor’s portfolio consists of six securities.

The individual returns of each of the security in the portfolio is given below:

Calculate the weighted average of return of the securities consisting of the portfolio.
Solution:

∴ Portfolio return is 12.98%.