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Portfolio Management - Illustration 5

AFM

Can we take the return on government bonds for each year as the Risk free rate as we are specifically evaluating the stock for each year? Or does taking the average of risk free rates up to the year of evaluation (i.e., for 2003, average of 6 & 5, for 2004, average of 6, 5 & 4 and for 2005, average of all the four years) appropriate?

Vigneshwar M

CA Final

★ 2K+

07-Oct-24 17:57

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Sriram Somayajula

Admin

07-Oct-24 18:26

In this illustration (Illustration 6 of Study material) ICAI has given the solution till the calculation of Beta & did not do the year wise computation. However, in Qn. 8 in test your knowledge section (Qn 15 of P600 compiler), they've taken the respective year's risk free rates for computation of year wise expected returns. That's why I got the doubt whether to use the same assumption in this Illustration too.

Thread Starter

Vigneshwar M

CA Final

★ 2K+

07-Oct-24 18:42

Thread Starter

Vigneshwar M

Sriram Somayajula

Admin

08-Oct-24 13:39

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