Part B: Risk and return on equity of Asos Plc and BooHoo Plc

Write a separate report that summarizes the results of your calculations, describes what you did
to obtain them and what your thoughts are on how to interpret them against the background of
the risk-return trade-off in financial markets. Please use stock price data mentioned above and
the FTSE AIM 100 index to answer the following questions:

(a) What is each company’s return volatility over the sample period? What is each
company’s compounded annual growth rate (of its stock price) over the sample period?
How would you interpret that growth rate? (10 marks)

(b) What is each company’s beta with respect to the FTSE AIM 100 Index? How would you
interpret your estimated betas? (10 marks)

(c) What is each company’s cost of equity capital? Please use the Capital Asset Pricing
Model (CAPM). How would you explain any difference in the cost of equity capital to
your CEO? (9 marks)

(d) How would you identify the amount of systematic risk and the amount of unsystematic
risk in each stock, using the CAPM? You do not have to perform that calculation, but
your CEO is curious about how this identification works. (6 marks)

(e) Are historical data suitable for judging the future development for these two stocks? (5
marks)

Your report has to be clear and concise and should consider the overall assignment word limit.

Notes on the data, your analysis and your submission.

• Use adjusted monthly closing prices from Yahoo Finance or similar. The tickers are ASC.L
for AsosPlc and BOO.L for BooHooPlc. Please do not forget to calculate returns before
you proceed.