FINC300-Assignment 5

FINC300-Assignment 5

Exercises 1 and 2 from Chapter 18 on page 325 of the textbook
1. Calculate the return on the ENI share and on the Italian index over 13 months until 1 January
2011. To help you, you have a record of the share price and of the general index.
What is the total risk of the ENI share?

2. A portfolio gives a 10% return with a standard deviation of 18%. You would like the standard
deviation to drop to 14%. What should you do?



Exercise 1 from Chapter 19 on page 343 of the textbook.
1. What rate of return should be required on the Bharti Airtel share, which has a β of 0.7, if the
Rio Tinto share, which has a β of 1.1, returns 10% and is correctly valued, and the rate of a riskfree asset is 5%?


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