O’Grady Apparel Company Essay

Analyzing Risk and parry on Chargers Products Investments Junior Sayou, a financial analyst for Chargers Products, a shaper of stadium benches, must evaluate the risk and return of two assets, X and Y. The firm is considering addng these assets to its diversified asset portfolio. To assess the return and risk of each(prenominal) asset, Junior gathered data on the annual cash emanate and beginning-and end-of-year values of each asset over the immediately preceding 10 years, 1997-2006.These data are summarized in the table below. Juniors probe suggests that both assets, on average, will tend to perform in the forthcoming just as they have during the other(prenominal) 10 years. He wherefore believes that the expected annual return rouse be estimated by conclusion the average annual return for each asset over the past 10 years.Junior believes that each assets risk can be assessed in two ways in isolation and as part of the firms diversified portfolio of assets. The risk of the assets in isolation can be engraft by using the standard expiration and coefficient of variation of returns over the past 10 years. The capital asset determine model (CAPM) can be used to assess the assets risk as part of the firms portfolio of assets. Applying some civilise quantitative techniques, Junior estimated betas for assets X and Y of 1.60 and 1.10, respectively. In addition, he found that the risk-free rate is currently 7% and that the market return is 10%.