Company A has an expected return of 5% and standard deviation of 5%. Company B has an expected return of 25% and standard deviation of 15%. Which one should a rational investor dchoose? O k depends on the person's tolerance for risk O Company A Company B They are indifferent Neither of them

Q: You observe the following: ABC Inc. has 1.8 Beta and .2 Expected return XYZ Inc has 1.6 Beta and .19…

A:

Q: An investment has a 20% chance of producing a 25% return, a 60%chance of producing a 10% return, and…

A: Computation:

Q: A rational investor seeking to maximize return for a given level of risk would most likely choose to…

A: Expected Return is the average of the past data of returns. E(R)=∑Xn or ∑PXX= ReturnP = Probability…

Q: You observe the following: ABC Inc. has 1.8 Beta and .2 Expected return XYZ Inc has 1.6 Beta and .19…

A: The financial ratios are used to measure the financial attractiveness and economic feasibility of…

Q: A. Walmart has both more total risk and more systematic risk.     B. Walmart has more total risk and…

A: The standard deviation is measured by total risk hence, Intel stock has more standard deviation…

Q: Assume that you manage a risky portfolio with an expected rate of return of 14% and a standard…

A: a.Calculation of Proportion y:The Proportion y is 87.50%.

Q: Ms. B has $1000 to invest. She is considering investing in the common stock of  company M. In…

A: The portfolio is the combination of securities from different companies, industries, and different…

Q: Given an expected return of 8% and a standard deviation of 9%, we can predict that there is a _____…

A: Given: Expected Return/Mean = 8% Standard deviation σ = 9% Observed Values = -19% and 35% Using the…

Q: Stock A has an expected return of 10% and a standard deviation of 20%. Stock B has an expected…

A: Expected return of B = 13% Risk free rate = 5% Market risk premium = 6%

Q: Part A: Compute the expected return, standard deviation, and value at risk for the following two…

A: The expected value of an investment is the weighted average of all possible returns of the…

Q: You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 36%.…

A: Given, Expected return = 17% Standard deviation = 36% T-bill rate = 6%

Q: Company XYZ has a CAPM beta of 1.5. The expected return on the market is 20% and the risk-free rate…

A: Expected return can be calculated by using CAPM equation given below Expected return =Risk free…

Q: A British company Afrox, has a standard deviation of 50% and a correlated of 0.65 with the market.…

A: Formulas: Beta = (Standard deviation of stock * Correlation with market) / Standard deviation of…

Q: Hi, An investor will choose between Asset Q with an expected return of 6.5% and a standard deviation…

A: Information provided:Asset Q has an expected return of 6.5% and standard deviation of 5.5%Asset U…

Q: Which investment has the least amount of risk? Standard deviation = $400, expected return = $5,000…

A: The relationship between standard deviation and expected return is that lower standard deviation…

Q: An analyst has modeled the stock of Crisp Trucking using a two-factor APTmodel. The risk-free rate…

A: Factor 1: Risk premium r1p =Expected return of factor 1 - Risk free rate Risk premium r1p = (12% -…

Q: Assume an investor with the coefficient of risk aversion A=5.5. To maximize her expected utility,…

A: Utility functions are used to measure the risk-reward tradeoff as the maximum return that a person…

Q: Which investment has the least amount of risk? Group of answer choices Standard deviation = $500,…

A: The portfolio risk is the volatility of returns of the portfolios. The risk of these portfolios may…

Q: You observe the following: ABC Inc. has 1.8 Beta and .2 Expected return ABC Inc. has 1.8 Beta and .2…

A: Given Information ABC Inc. Beta = 1.8 Expected Return of ABC Inc. =0.2 XYZ Inc beta =1.6 Expected…

Q: I need help with this problem and want to set up for excel with formulas.

A: Value of Z at the 95% Confidence Level = 1.96 Calculation of expected return, standard deviation and…

Q: return

A: Formula to calculate the expected return is: E(r) = Sum(Return*Probability) Formula to calculate the…

Q: The expected return for Asset Y is 24%, and it has a standard deviation of 14%. The expected return…

A: Standard deviation is one of the measure of risk. Less the standard deviation , less risky the asset…

Q: Ebenezer Scrooge has Invested 55% of his money in share A and the remainder in share B. He assesses…

A: Given Information: Return of stock A is 15% and stock B is 19% Proportion of stock A is 55% and 45%…

Q: Assume an economy in which there are three securities:  Stock A with rA = 10% and σA = 10%; Stock B…

A: The question is related to the Portfolio Management. The details of two securities are given.…

Q: What is a beta coefficient, and how are betas used in risk analysis? Do the expected returns appear…

A: Estimated rate of return is the rate of return which an investor expects to generate from the…

Q: Assume you have an optimal risky portfolio with an expected return of 17% and a standard deviation…

A: Given: Expected return = 17% Standard deviation = 27% Risk free rate = 5% Risk aversion = 2

Q: Suppose You have decided to invest 40% of your wealth in Company A which has an expected return of…

A: given, ra=15%rb=9%rp=13% let investment = wa wb=wa-1

Q: Average Return and Standard Deviation

A: Average Return: Average return is the average of different rates at different period of times.…

Q: Security A has an expected rate of return of 6%, a standard deviation ofreturns of 30%, a…

A: Beta coefficient: Beta coefficient measures the propensity of an assumed security’s anticipated…

Q: Stock A has an expected return of 15%, and a standard deviation of 1%. Stock B has an expected…

A: Data given: Stock A:: ER = 15% SD= 1%   Stock B: ER=20% SD =2% Correlation coefficient between two…

Q: Suppose an investor wants to invest either in the common stock of Square Corporation or Beximco…

A: In this question coefficient of variation should be solved in order to analyse the risk to return…

Q: Security A has an expected return of 7%, a standard deviation of returns of35%, a correlation…

A: Given data; 1) stock A  expected return = 7% standard deviation = 35% correlation coefficient with…

Q: Company A and B both expected rates of return of 18%. Company A has a Standard Deviation of 45% and…

A: Expected returns of both A and B = 18% Company A standard deviation = 45% Company B standard…

Q: An investor puts 60% of her assets in a risky portfolio with an expected return of 15% and variance…

A: The expected return is the amount of profit or loss an investor can anticipate receiving on an…

Q: Using the single factor model for firm with a Beta of 1 and when the standard deviation of the…

A: Solution- A- Since the beta of the firm is 1 ,The standard deviation of the firm equal to the…

Q: Consider a risky portfolio, A, with an expected rate of return of 0.16 and a standard deviation of…

A: Given: Expected return is 0.16 Standard deviation is 0.25

Q: A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15. The risk-free…

A: Investor will select that portfolio that maximizes the returns for a given level of risk.

Q: Assume that there is some risky portfolio Q, which has an expected return of 15%, and a standard…

A: Weight of portfolio Q + Weight of risk free asset = 1 Expected return on portfolio = Weight of…

Q: The expected rate of return for the stock of Cornhusker Enterprises is 20 percent, with a standard…

A: Expected return: The return anticipated by investor from his investment is called expected return.…

Q: You manage a risky portfolio with an expected rate of return of 19% and a standard deviation of 32%.…

A: a) Proportion of Y= (E(Rp) - Risk free rate) / A*(standard deviation)^2 Where, E(Rp) = Expected…

Q: Assume that you manage a risky portfolio with an expected rate of return of 20% and a standard…

A: a.Given,Standard Deviation of Portfolio = 46%New Standard Deviation of Portfolio = 35% Calculation…

Q: a. Use the following information: E[rXOM] = 15.6%, standard deviationXOM = 15.9% E[rMS]=29.7%,…

A: “Since you have posted a many questions, we will solve first question for you. To get the remaining…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.