**Risk and Return Problems and Solutions**

Contents

**Problem 1: **

On the basis of expected Rate, Standard Deviation, Variance and Coefficient of variation decided which of the following company is best for investment (Single company Risk analysis).

**Solution: **

On the basis of above mention risk indicators Company H is best.

**Problem 2:**

Following are the probability distribution of returns of portfolio of Stock A and Stock B in equal proportion of weight in each state of economy. You are required to calculate Expected Return and Risk for individual Stocks?

**Solution: **

*Answer: 14.14*

*Answer: 14.14*

**Problem 3:**

If you deposit Rs. 1,000 in the bank at a nominal interest rate of 6 percent, you will have Rs. 1,060 at the end of the year. Suppose that the inflation rate during the year is also 6 percent. Find real amount in Rupees?

**Solution: **

*Answer: Rs. 1,000*

**Problem 4:**

You save Rs. 100 and invest it at a nominal interest rate of 8%. Given the expected inflation is 5% per year, what is the real rate of return?

**Solution: **

*Answer: 2.87%*

**Problem 5:**

Suppose the current market value of Rs. 100 and no dividend income after one year. Find expected Rate of Return?

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