Question

K Co. is a publicly listed company involved in the production of highly technical and sophisticated...

K Co. is a publicly listed company involved in the production of highly technical and sophisticated electronic components for complex machinery. It has a number of diverse and popular products, an active research and development department, significant cash reserves and a highly talented management who are very good in getting products to market quickly.

A new industry that K Co. is looking to venture into is biotechnology, which has been expanding rapidly and there are strong indications that this recent growth is set to continue. However, K Co. has limited experience in this industry. Therefore, it believes that the best and quickest way to expand would be through acquiring a company already operating in this industry sector.

Discussions taken place about the possibility of acquiring Tee Co. being acquired by K Co. Price of Tee company in stock market during last one year are as follows.

Price at the end of month

 Month Month end Price KSE 100 INDEX Jan 175 32600 Feb 185 33900 March 152 33500 April 190 34000 May 195 33500 June 188 33800 July 190 33700 Aug 195 33200 Sep 190 32900 Oct 185 33100 Nov 190 33900 Dec 88 34100
1. Calculate average return for both stock and market
2. Calculate Standard deviation for both
3. Calculate coefficient of variation for both
4. Calculate Beta of stock
5. Suggest what you understand from Beta

 Month Month end Price RETURN KSE 100 INDEX RETURN Jan 175 32600 Feb 185 5.71% 33900 3.99% March 152 -17.84% 33500 -1.18% April 190 25.00% 34000 1.49% May 195 2.63% 33500 -1.47% June 188 -3.59% 33800 0.90% July 190 1.06% 33700 -0.30% Aug 195 2.63% 33200 -1.48% Sep 190 -2.56% 32900 -0.90% Oct 185 -2.63% 33100 0.61% Nov 190 2.70% 33900 2.42% Dec 88 -53.68% 34100 0.59% AVERAGE RETURN -3.69% 0.42% =MEAN STANDARD DEVIATION 19.38% 1.74% =STDDEV COEFF . OF VARIATION -5.256221822 4.103471499 =STD DEV / MEAN VARIANCE 3.76% 0.03% =VAR COVARIANCE 0.000569039 =COVAR BETA 1.89 =COVAR / VARIANCE (KSE 100 INDEX)

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