Premium Essay

A Comparative Analysis of Various Investment Avenues with Respect to Risk & Return

In: Business and Management

Submitted By shampyg
Words 17636
Pages 71
A COMPARATIVE ANALYSIS OF VARIOUS INVESTMENT AVENUES WITH RESPECT TO RISK & RETURN

A Project Report
Submitted in partial fulfillment of the requirements for the
Award of Degree of E-MBA

Submitted by :
Prabhjeet Singh

[pic]

BHARATI VIDYAPEETH DEEMED UNIVERSITY, PUNE (INDIA)
School of Distance Education (SDE)
Academic Study Center : BVIMR, New Delhi
(University established under 3 of the UGC act,1956)

CONTENTS

|S.No | |P.No. |
| |Acknowledgement |2 |
| |Certificate |3 |
|1. |Introduction | |
| |1.1 : Introduction |6-7 |
| |1.2 Company Profile | |
| |1.3 Industry Analysis |8-14 |
| |1.4 Problem in the Organisation | |
| |1.5 SWOT Analysis |15-16 |
| | | |
| | |17-19 |
| |…...

Similar Documents

Premium Essay

Comparative Analysis of Pnb Bank

...traditional operational methods of directed credit, directed investments and fixed interest rates, all of whichled to deterioration in the quality of loan portfolios, inadequacy of capitaland the erosion of profitability. The recent international consensus on preserving the soundness of thebanking system has veered around certain core themes. These are:effective risk management systems, adequate capital provision, soundpractices of supervision and regulation, transparency of operation,conducive public policy intervention and maintenance of macroeconomicstability in the economy.Until recently, the lack of competitiveness vis-à-vis global standards, lowtechnological level in operations, over staffing, high NPAs and low levelsof motivation had shackled the performance of the banking industry.However, the banking sector reforms have provided the necessaryplatform for the Indian banks to operate on the basis of operationalflexibility and functional autonomy, thereby enhancing efficiency,productivity and profitabili 1.4 Introduction of Commercial Bank A commercial bank is a type of financial intermediary and a type of bank. Commercial banking is also known as business banking. It is a bank that provides checking accounts, savings accounts, and money market accounts and that accepts time deposits. After the Great Depression, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two......

Words: 5074 - Pages: 21

Premium Essay

Risk and Return

...Risk and return will be very central terms in our analysis and it is essential that the reader clearly understands the meaning of each term and how assets with different payout structures can be compared. General utility theory suggests that the average investor is risk averse. Given the same expected return of two assets with different risks, he would prefer the one with less risk. (This assumption may not be perfectly true for all individuals in all situations, but for the investor community as a whole it is probably true). For an asset with uncertain cash flows and payoffs, which are normally distributed, the mean of the distribution will be the expected return while the standard deviation forms some kind of “risk”. Choosing the “less risky” asset therefore comes down to choosing the asset with the lowest standard deviation in its payout distribution. An investor could also approach the problem from the other direction, choosing among assets with the same risk and then choose the asset with the highest expected return. Risk is usually defined as the volatility of returns, measured by standard deviation. The variance of a portfolio depends not only on the individual variances of the as- sets, but also on the co-variances between the components of the portfolio. As an extreme example, a portfolio consisting of two securities – a long position in a stock and with an appropriately chosen position in a put option on the same stock – will have......

Words: 1289 - Pages: 6

Free Essay

Risk Analysis on Investment Decision (Silicon Arts Inc)

...Running head: CAPITAL BUDGETING Risk Analysis on Investment Decision Risk Analysis on Investment Decision Silicon Arts, Incorporated (SAI) is a manufacturer of circuits that are used in the manufacture of electronic equipment items. During their initial years in operation, there was an increase in the industry followed by a 40% decline. In order to remain competitive and stay profitable, SAI controlled expenses. Current trends indicate the industry may be on the rise again. SAI wants to develop some new capital investment projects that are in line with their goals: increase their market share, and keep pace with new technology (University of Phoenix, 2007). Future Scenarios The first task in the simulation was to examine probable future scenarios that could potentially affect SAI cash flow with two projects, Dig-image and W-Comm. Part of SAI’s plans is their desire to earn $54 million in their first year by selling 400,000 units, however they first need to determine their working capital. “Working capital rises over the early years of the project as expansion occurs. However, all working capital is assumed to be recovered at the end, a common assumption in capital budgeting” (Ross, Westerfield, & Jaffey, 2005, p. 183). SAI is expecting growth will be 20% in the first three years and then decrease 10% annually in years 4 and 5. SAI is expecting increasing competition, decreasing prices, and a short lifespan of the technology that could be obsolete......

Words: 1214 - Pages: 5

Premium Essay

Comparative Analysis of Various Cloud Technologies

...Volume 1 No.1 Dec. 2011 Comparative Analysis of Various Cloud Technologies Dr. Gurdev Singh Professor and Head Department of Computer science & Engineering Adesh Institute of Engineering & Technology Faridkot (India) Akanksha Lecturer Department of Computer science & Engineering Adesh Institute of Engineering & Technology Faridkot (India) singh.gndu@gmail.com 1. ABSTRACT With the increasing prevalence and demand of large scale cloud computing environment, a researcher has to draw more attention towards the services provided by the CLOUD. As the access to the server is increasing, centralized and distributed computing architecture will produce bottlenecks data which affect the quality of cloud computing services and bring the huge support to users. In this paper we are going to propose certain vital aspects such as memory utilization, storage capacity to check the efficiency and performance of various clouds in cloud computing environment. This is based upon the static data. The proposed mechanism enables users to access memories in various systems depending on the predefined criteria. Selection method for accessing the memory of a resource is properly introduced in this paper. Our evaluation results show that the aggregation of various clouds is effective in indicating the better efficiency and also to reduce network traffic sent over cloud networks. er.akanksha1988@gmail.com WAN networking. The interlinking and connection between various sources is shown......

Words: 2356 - Pages: 10

Premium Essay

Financial Ratios, Risk and Return Analysis of Pt Ace Hardware Indonesia Tbk

...Financial Management – Module Assignment Financial Ratios, Risk and Return Analysis of PT Ace Hardware Indonesia Tbk PREFACE This Financial Management Module Assignment has been prepared to fulfill the requirements of the subject. In this module assignment, we will discuss our analysis about PT Ace Hardware Indonesia Tbk as our object of this assignment. We reviewed and analyzed the firm’s financial statements periodically, both to uncover developing problems and to assess the firm’s progress toward achieving goals. Financial ratios enable financial managers to monitor the pulse of the firm and its progress toward its strategic goals. We also analyzed about a firm’s risk and expected return directly affect its share price. It is therefore the financial manager’s responsibility to assess carefully the risk and return of all major decisions so as to ensure that the expected returns justify the level of risk being introduced. It is hoped that this module assignment can fulfil the requirements of the subject in this semester. Jakarta, December 2010 Team BRIEF CONTENTS COVER PAGE 1 PREFACE 2 BRIEF CONTENTS 3 CHAPTER 1 INTRODUCTION A. PT Ace Hardware Indonesia Tbk 5 B. Corporate Vision 6 C. Corporate Mission 6 D. Corporate Culture 6 CHAPTER 2 FINANCIAL STATEMENTS A. Balance Sheets as of December 31, 2005, 2006 7 B.......

Words: 2638 - Pages: 11

Premium Essay

Various Investment Avenues

...- I INTRODUCTION Different investment avenues are available to investors. Mutual funds also offer good investment opportunities to the investors. Like all investments, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes while making investment decisions. Types of investor In continuation of the lessons I’ve learned from Rich Dad Poor Dad author, Robert Kiyosaki, I will discuss today what he called “Types of Investors.” According to him, there are two main types of investors: Average Investors and Professional Investors. Average investors - buy packaged securities such as mutual funds, treasury bills, or real-estate-investment trusts. Professional investors - are more aggressive—they create investment opportunities or get in on the ground floor of new offerings, build businesses and marketing networks, assemble groups of financiers to fund deals too large for them to undertake alone, and pick the companies with the most promise for initial public offerings of stock. INVESTMENT AVENUES IN INDIA There are a large number of investment instruments available today. To make our lives easier we would classify or group them under 4 main types of investment avenues. We shall name and briefly describe......

Words: 22545 - Pages: 91

Premium Essay

Risk and Returns

...RISK –RETURN TRADE -OFF ON THE NIGERIAN STOCK EXCHANGE OLOWE, OLUSEGUN BANKING AND FINANCE DEPARTMENT COVENANT UNIVERSITY OTA. NIGERIA E-mail: oreoba2000@yahoo.com oreoba2000@gmail.com 1 ABSTRACT Expected excess returns on bonds and stocks, real interest rates, and risk shift over time in predictable ways. Furthermore, these shifts tend to persist for long period. Changes in investment opportunities can alter the risk-return trade-off of bonds, stocks, and cash across investment horizons, thus creating a term structure of the risk-return trade-off. This term structure can be extracted from a parsimonious model of return dynamics, which was illustrated with data from the stock market in Nigeria using the VAR model in the light of the reforms in the financial services sector coupled with the stock market crash and the global financial crisis. Using annual returns over the period of 1981 to 2008, volatility persistence, asymmetric properties and riskreturn relationship are investigated for the Nigerian stock market visà-vis the calendar effects on stock market performances. The degree of volatility persistence and leverage effect supporting the work of Nelson (1991) was visible in the relationship between value index of stocks, market capitalization and the volume of transactions. Key words: Calendar effect, Volatility, Stock market, Financial Reforms, Global Financial crisis, Volatility persistence, VAR, Risk-return tradeoff 2 INTRODUCTION The major......

Words: 6688 - Pages: 27

Premium Essay

Risk & Return Analysis

...Risk & Return Analysis: Analyzing an equally weighted portfolio of investments in Amazon, Inc., Yahoo! Inc., and Direct TV stock compared to the S&P 500 Introduction: Every day, millions of investors spend countless hours following the stock market in the hopes of striking it rich. Making the right moves at the right moments is crucial when one looks to make large returns in the market. While luck affords many investors the opportunity to make lucrative returns in the stock market, this reward does not come without risk. In order to balance their returns and the amount of risk that they are exposed to, many investors create an investment portfolio as a means to mitigate risks in the market at the expense of foregoing potentially higher returns on their investment. To illustrate the effects that a diversified portfolio can have on the amount of risk an investor takes on as well as the returns that the investment generates, a sampling of three random stocks and the S&P 500 index was created to examine the effects that diversification has on investment risk. Investments: For this analysis, monthly stock data from December 1, 2009 – December 1, 2014 was compiled on three stocks and the S&P 500. The three investments chosen for the portfolio were Amazon.com Inc. (AMZN), Yahoo! Inc. (YHOO), and DirectTV. (DTV), and each represent 25% of the portfolio. In order to analyze the risks associated with each stock, a Risk-Free rate of interest must be established in order...

Words: 1815 - Pages: 8

Premium Essay

Risk and Return

...Exercises E8-1. Total annual return Answer: ($0 $12,000 $10,000) $10,000 $2,000 $10,000 20% Logistics, Inc. doubled the annual rate of return predicted by the analyst. The negative net income is irrelevant to the problem. E8-2. Expected return Answer: Analyst 1 2 3 4 Total Probability 0.35 0.05 0.20 0.40 1.00 Return 5% 5% 10% 3% Expected return Weighted Value 1.75% 0.25% 2.0% 1.2% 4.70% E8-3. Comparing the risk of two investments Answer: CV1 0.10 0.15 0.6667 CV2 0.05 0.12 0.4167 Based solely on standard deviations, Investment 2 has lower risk than Investment 1. Based on coefficients of variation, Investment 2 is still less risky than Investment 1. Since the two investments have different expected returns, using the coefficient of variation to assess risk is better than simply comparing standard deviations because the coefficient of variation considers the relative size of the expected returns of each investment. E8-4. Computing the expected return of a portfolio Answer: rp (0.45 0.038) (0.4 0.123) (0.15 0.174) (0.0171) (0.0492) (0.0261 0.0924 9.24% The portfolio is expected to have a return of approximately 9.2%. E8-5. Calculating a portfolio beta Answer: Beta (0.20 1.15) (0.10 0.85) (0.15 1.60) (0.20 1.35) (0.35 1.85) 0.2300 0.0850 0.2400 0.2700 0.6475 1.4725 E8-6. Calculating the required rate of return Answer: a. Required return 0.05 1.8 (0.10 0.05) 0.05 0.09 0.14 b. Required return 0.05 1.8 (0.13 0.05) 0.05 0.144 0.194 c. Although the risk-free rate does......

Words: 5293 - Pages: 22

Premium Essay

Risk and Return

...__________ risk of the portfolio decreases until 10 to 20 securities are included. The portion of the risk eliminated is __________ risk, while that remaining is __________ risk * o diversifiable; nondiversifiable; total o relevant; irrelevant; total o total; diversifiable; nondiversifiable o total; nondiversifiable; diversifiable The higher an asset's beta, * o the more responsive it is to changing market returns o the higher the expected return will be in a down market o the lower the expected return will be in an up market o the less responsive it is to changing market returns __________ probability distribution shows all possible outcomes and associated probabilities for a given event * o A continuous o An expected value o A discrete o A bar chart A beta coefficient of 0 represents an asset that * o is less responsive than the market portfolio o has the same response as the market portfolio o is more responsive than the market portfolio o is unaffected by market movement The financial manager's goal for the firm is to create a portfolio that maximizes return in order to maximize the value of the firm * o False o True The security market line (SML) reflects the required return in the marketplace for each level of nondiversifiable risk (beta) * 212 Gitman • Principles of Finance, Eleventh Edition o False o True The portion of an asset's risk that is attributable to firm-specific, random causes is called * o systematic......

Words: 4119 - Pages: 17

Premium Essay

A Comparative Analysis of the Profitability of Two Potential Equity Investments

...Running Title A Comparative Analysis of the Profitability of Two Potential Equity Investments Janet Zaharchuk BUSI 1043 – Introduction to Financial Accounting Professor: Brent Koritko Sunday, July 26, 2015 Yorkville University INTRODUCTION The purpose of this report is to perform a comparative analysis of the profitability of two potential equity investments: Auto Wash Bot Ltd. (AWBL) and Popeye’s Muscle Wash Ltd. (PMWL). AWBL is selling 50% ownership for $100,000 in efforts to pursue expansion in the mobile device industry, and PMWL is selling 100% of its business for $100,000 to pursue retirement. A complete analysis of each company’s income statement will report key issues in both firms, as well as offer a recommendation given the case facts. REVIEWING LAST YEAR’S EARNINGS Comparative Income Statements Auto Wash Bot Ltd. & Popeye’s Muscle Wash Ltd. (for the year ended December 31, 2015) | Auto Wash Bot Ltd. | Popeye’s Muscle Wash Ltd | Revenue | 375,000 | 375,000 | Cost of Goods Sold | 86,250 | 163,125 | Gross Profit | 288,750 | 211,875 | Other Expenses: | | | Advertising | 35,400 | 5,200 | Office Expense | 22,750 | 17,400 | Research | 195,000 | | Repairs & Maintenance | | 85,000 | Wages & Salaries | 40,000 | 50,000 | Total Other Expenses | 293,150 | 157,600 | Income Before Taxes | (4,400) | 54,275 | Income...

Words: 718 - Pages: 3

Premium Essay

Risk and Return

...Investment and Portfolio Management: Risk and Return Marvin Brown is a savvy investor who is always looking for a sound company to include in his portfolio of stocks and bonds. Being somewhat risk-averse, his main objective is to buy stock in firms that are mature and well-established in their respective industries. Wal-Mart is one of the stocks Marv is currently considering for inclusion in his portfolio. Wal-Mart has four major areas of business: traditional Wal-Mart discount stores, Supercenters, Sam's Clubs, and international operations. Although Wal-Mart was established over 50 years ago, it continues to achieve growth through expansion. The Supercenter concept, which combines groceries and general merchandise, is extreme success as 75 new Supercenters were opened last year alone. Another 95 will be opening over the next two years. Sam's clubs have also seen success as 99 Pace stores (Pace is one of Sam's former Competitors) were converted to Sam's stores in 1995. In addition to taking over competitor stores, Sam's also opened 22 new stores of its own. Internationally, the picture is equally as rosy. In Canada, 122 former Woolco stores were converted to Wal-Mart discount stores. Expansion has reached Mexico and Hong Kong as well, as 24 Clubs and Supercenters and 3 "Value Clubs" were established, respectively. Wal-Mart plans to continue its reign as the world's largest retailer through expansion by developing the previously discussed 95 Wal-Mart discount stores, 12 new......

Words: 614 - Pages: 3

Premium Essay

Risk and Return

...Return, Risk and The Security Market Line - An Introduction to Risk and Return Whether it is investing, driving or just walking down the street, everyone exposes themselves to risk. Your personality and lifestyle play a big role in how much risk you are comfortably able to take on. If you invest in stocks and have trouble sleeping at night, you are probably taking on too much risk. (For more insight, see A Guide to Portfolio Construction.) Risk is defined as the chance that an investment's actual return will be different than expected. This includes the possibility of losing some or all of the original investment. Those of us who work hard for every penny we earn have a hard time parting with money. Therefore, people with less disposable income tend to be, by necessity, more risk averse. On the other end of the spectrum, day traders feel that if they aren't making dozens of trades a day, there is a problem. These people are risk lovers. When investing in stocks, bonds or any other investment instrument, there is a lot more risk than you'd think. In this section, we'll take a look at the different kind of risks that often threaten investors' returns, ways of measuring and calculating risk, and methods for managing risk. Expected Return, Variance and Standard Deviation of a Portfolio Expected return is calculated as the weighted average of the likely profits of the assets in the portfolio, weighted by the likely profits of each asset class. Expected return is......

Words: 10559 - Pages: 43

Premium Essay

Risk and Return

...Chapter 5 Risk and Return 5.1 RATES OF RETURN McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Learning objectives  Use data on the past performance of stocks and bonds to characterize the risk and return features of these investments  Determine the expected return and risk of portfolios that are constructed by combining risky assets with risk-free investment in Treasury bills  Evaluate the performance of a passive strategy McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Holding Period Return  The holding period return (HPR)(보유기간수익률)  Depends on the increase (or decrease) in the price of the share over the investment period as well as on any dividend income.  Rate of return over a given investment period McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Example 5.1  Suppose you are considering investing some of your money, now all invested in a bank account, in a stock market index fund. The price of a share in the fund is currently $100, and your time horizon is one year. You expect the cash dividend during the year to be $4, so your expected dividend yield is 4%.  Your HPR will depend on the price one year from now. Suppose your best guess is that it will be $110 per share.  The your capital gain will be $10 (110-100), so your capital gains yield is $10/$100=.10 or 10%. The total holding period rate of return is the sum of the......

Words: 3506 - Pages: 15

Premium Essay

Risk and Return

...RISK AND RETURN Risk is existing in every business decision. For Eg: Selection of an asset for production department, developing a new product etc., Therefore decision maker has to asses the risk and return before taking any financial decision. To do so finance manager must learn to assess risk and return. Risk can be measured in different ways. Before going to learn the computation and return it is require understanding the followings: 1. Cash Flows: financial assets are expected to generate cash flows and risk of Financial assets assessed in terms of the variations of its expected cash inflows. 2. Risk can be measured either on stand alone basis or in a portfolio context 3. Classification of risk: the risk of assets is divided into two parts. a. Diversifiable Risk b. Market Risk. Diversifiable risk is a company’s’ specific risk and can be completely eliminated through diversification. On the other hand market risk arises from market movements and which cannot be eliminated through diversification. 4. Investors are Risk Averse: (unwilling/opposed) Generally investors are risk averse. It does not mean that investors do not buy risk assets, they buy risk assets, when they promise extra return for bearing extra risk. Risky investments provide relatively high return. Risk: Risk is the chance of financi8al loss or the variability of returns associated with a given assets. Assets that are having higher chances of loss ar viewed as more......

Words: 496 - Pages: 2