Filmore Enterprises Essay
1. a. See the attachment (expected rate of return) b. Based soly on expected returns, investment on CPC appears the best, for it has 9.70% expected returns, yet the investment on MORELY appears the cost, which has only 5.70% expected returns. c. Rate of return is mainly connected with the beta coefficient, which means if the rate of return is relatively higher, then the company will have higher risk. Judging from table1 in the attachment, CPC with higher rate of return(9.70%) has higher beta coefficient(1.53%), which means it might be the most profitable one, but the risk is high, while MORELY has the lowest rate of return(5.70%)with the risk of -0.77% (it’s riskless). As for EAT, the …show more content…
7. a. See the CHARACTERISTIC LINES on the attachment.( X-axis, Y-axis, slop coefficients)
Compare the slop coefficients in the characteristic lines with thoes betas provided in Table 1, we can see that the values are almost the same. b. The significance of the difference between the plot points and the regression line, as you can see from the characteristic lines, is not simply errors. If the plot points closer to the line, which is 1.00, the return would be better. c. It measures the part of the asset's statistical variance that cannot be removed by the diversification provided by the portfolio of many risky assets, because of the correlation of its returns with the returns of the other assets that are in the portfolio.