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BUS 286 Corporate Finance - Murdoch university

   

Added on  2019-10-30

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Running head: CORPORATE FINANCECorporate FinanceName of the Student:Name of the University:Author’s Note:
BUS 286 Corporate Finance - Murdoch university_1
1CORPORATE FINANCETable of ContentsPart 1:...............................................................................................................................................2Question 1: Explaining how risk of shares can be calculated by the standard deviation................2Question 2: Explaining how adding more shares to a portfolio can affect the risk return..............2Question 3: Explaining if one of the two assets is risk free asset then identifying the calculationof risk from two assets.....................................................................................................................3Question 4: Explaining the distinction between systematic and unsystematic risk.........................3Part 2:...............................................................................................................................................4Question 1:.......................................................................................................................................4(i) Calculating returns and SD of Asset A and B:...........................................................................4(ii) Calculating returns and SD of Asset A, B and C:......................................................................5(iii) Explaining the difference between risk and return of Portfolio 1 and 2:..................................5(iv) Calculating returns and SD of Asset A, B and F:.....................................................................6(v) Calculating returns and SD of Asset A, B and C:......................................................................6(vi) Calculating returns and SD of Asset A, B, C and F:.................................................................7(vii) Explaining the difference in portfolio 3, 4, and 5, while including the impact of the risk freeasset:................................................................................................................................................7References:......................................................................................................................................9
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2CORPORATE FINANCEPart 1:Question 1: Explaining how risk of shares can be calculated by the standard deviationThe overall standard deviation is mainly calculated with the help of mathematicalmeasurement, which directly averages the overall variance of the returns provided by the stock.Moreover standard deviation is also identified as the Dispersion of the set of data from its mean.this could eventually help in calculating as a square root of the variance that is derived from thereturn. The overall standard deviation mainly helps in identifying the volatility that a stock couldhave from the average return projected yearly. There are different types of data that is evaluatedwith the help of standard deviation, if the data point is further from the mean there is higherdeviation and volatility in stock. Standard deviation is used in identifying the historical volatilityof a stock, which could directly help in detecting the overall variations and returns that could beprojected from an investment (Adamczyk et al. 2014).Question 2: Explaining how adding more shares to a portfolio can affect the risk returnFrom the evaluation of the article Simon Hoyle’s there is no explanation on the riskfactor, if overall investor decides to buy more shares. However, buying of different stocksmainly helps in diversifying the overall portfolio, which acts as an adequate hedging measurethat could increase return from investment and reduce the negative impact of capital marketvolatility. Hence, use of more shares could eventually help in improving the relevant returns thatcould be generated from portfolio. Investors mainly use more than one stock in a portfolio byevaluating the correlation and coefficient condition. This evaluation of the overall correlationand coefficient condition mainly helps in identifying stocks that have negative correlation with
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