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Table of Contents
Returns - Boral (BLD), Reference Company & Market    2
Monthly Return of Market    2
Average and Standard Deviation    2
Portfolio    4
Expected Return using CAPM    6
Boral (BLD)    6
Reference Company    7
Portfolio expected return and beta    8
Conclusion    9
Reference    10
Returns - Boral (BLD), Reference Company & Market
Monthly Return of Market
The monthly returns are calculated with the help of formula Rt = (Pt – Pt-1) / Pt-1. The monthly returns for market calculated with help of month closing index is given in the table below.
    All ords accumulated
    All ords accumulated
    month closing index
    Monthly returns
    55459.75
    
    57712.86
    4.06%
    58813.5
    1.91%
    60007.77
    2.03%
    59809.19
    -0.33%
    59916.01
    0.18%
Average and Standard Deviation
The average and standard deviation in excel is calculated using functions “AVERAGE” and “STDEV” respectively. The average rate of return and standard deviation of returns for Boral (BLD), Reference Company and the market index is summarized in the table below.
    
    Boral (BLD)
    Reference Company
    All ords accumulated
    average return
    0.032522
    0.002
    0.015695967
    SD return
    0.025602663
    0.062609903
    0.017384164
The mean return of Boral stock (0.032522) is expected to be higher than the reference company (0.002). The risk for any stock is measured in terms of standard deviation. Standard deviation is a measure of dispersion of data in true units. The standard deviation of Boral stock is low indicating that its mean return is reliable. The standard deviation of return for the reference company is high with the value of 0.06 indicating that its mean return is not reliable.
The mean return of Boral stock is higher than market average return. The mean return of Reference Company is lesser than the average market return.
Portfolio
The mean and standard deviation of portfolio is calculated with the help of following formula.
Ep = u1*w1 + u2*w2
SDp = sqrt(w12*sd12 + w22*sd22 +2w1w2sd1sd2p(1,2))
Where, ui is the mean of respective company. i =1, 2
Sdi is the standard deviation of respective company. i =1, 2
w1 and w2 are weight corresponding to respective companies. Assuming equal weights for the two companies indicates that w1 = w2 =...