E. All choices are incorrect 21-Which of the following statements is true? A. Investments that have a positive net present value should be considered for acc B. Investments that yield a positive internal rate of return should be accepted C. Investments that pay back in five years or less should always be accepted D. Investments that have a positive net present value should always be accepted E. All choices are incorrect dra?" ora best
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- Sharon Smith, the financial manager for Barnett Corporation, wishes to select one of three prospective investments: X, Y, and Z. Assume that the measure of risk Sharon cares about is an asset's standard deviation. The expected returns and standard deviations of the investments are as follows: Investment Expected return Standard deviation X 17% 7% Y 17% 8% Z 17% 9% a. If Sharon were risk neutral, which investment would she select? Explain why. b. If she were risk averse, which investment would she select? Why? c. If she were risk seeking, which investments would she select? Why? d. Suppose a fourth investment, W, is available. It offers an expected return of 18%,and it has a standard deviation of 9%. If Sharon is risk averse, can you say which investment she will choose? Why or why not? Are there any investments that you are certain she will not choose?Ex ante returns are ? a. Those that investors expect to never receive b. Those that investors expect to receive today c. Those that investors expect to receive in the future d. Those that investors expect to receive in the past. ********************** correct answer ***********You are considering two alternative two-year investments: You can invest in a risky asset with a positive risk premium and returns in each of the two years that will be identically distributed and uncorrelated, or you can invest in the risky asset for only one year and then invest the proceeds in a risk-free asset. Which of the following statements about the first investment alternative (compared with the second) are true?a. Its two-year risk premium is the same as the second alternative.b. The standard deviation of its two-year return is the same.c. Its annualized standard deviation is lower.d. Its Sharpe ratio is higher.e. It is relatively more attractive to investors who have lower degrees of risk aversion.
- An investor is consider four different opportunities, A, B, C, or D. The payoff for each opportunity will depend on the economic conditions, represented in the payoff table below. Economic Condition Investment Poor Average Good Excellent (S1) (S2) (S3) (S4) A 50 75 20 30 B 80 15 40 50 C -100 300 -50 10 D 25 25 25 25 What decision would be made under minimax regret?1- explain what would you take to compare the worthness of two different fianancial investments? how would you choose which investment is amore attractive choice? 2- explain whether there are typically differences between the past performance and the future performance of a fianincial investment ? if not why not ?Please select the option that best analyzes the RETURN ON EQUITY for our example company. Return on equity tells us how well we have used our owners' investments to provide a return on their investment. Our investors require a return of 5%, so they would accept the return on equity for the year, since it is LESS than their return they accept to earn. Return on equity tells us how well we have used our owners' investments to provide a return on their investment. Our investors require a return of 5%, and they are content as the example company provided a return EQUAL to their expected return. Return on equity tells us how well we have used our owners' investments to provide a return on their investment. Our investors require a return of 5%, so they would accept the return on equity for the year. Return on equity tells us how well we have used our owners' investments to provide a return on their investment. Our investors require a return of 5%, so they would NOT ACCEPT the…
- In the context of the different categories of investors, match each sentence to the correct category of investor. * Conservative Moderate conservative Moderate Moderate aggressive Aggressive This investor is looking to invest for the long-term with a specific goal in mind (for example, college savings, retirement, etc.). Investor who does not want to lose any capital and counts on the investment revenues to pay for day to day living expenses. This investor is willing to take on more risk to realize higher returns, being able to accept higher downside risk than the market, but expects to be substantially compensated when markets go up. Similar to Conservative, but this investor wants to participate a little more in market changes although wants maximum protection. This investor is willing to accept large fluctuations in portfolio returns to produce returns substantially above the market in the long-term, usually having an extremely long-term horizon so that she/he can…Suppose there are two investments A and B. Either investment A or B has a 4.5% chance of a loss of $15 million, a 2% chance of a loss of $2 million, and a 93.5% change of a profit of $2 million. The outcomes of these two investments are independent of each other. (a) What is the 95% VaR of investment A? How about investment B? (b) What is the 95% for a portfolio consisting of both investments A and B?(Hint: write out the probabilities of all possible portfolio outcomes.) (c) Is the summation of the 95% VaRs of the individual investments greater or smaller than the 95% VaR of the portfolio? If we measure the risk of an investment or portfolio using VaR, does this suggest that diversificationmust decrease risk? (Intuitively, putting A and B in a portfolio is a form of diversification.)Consider two different assets. Asset A has a mean expected return of 6% with a standard deviation of 22%. Asset B has a standard deviation of returns of 32%. What should be the mean expected return on asset B for a rational investor to be indifferent about these two investments? Answer only if you are 100% sure, other wise i will report your answer.
- Which of the following statements describing the elements of intrinsic valuation is most accurate? a. A simple calculation of present values of expected cashflows of different investments using the risk free rate would be enough to determine which asset is best. b. The risk-free rate is the lowest rate that an investor can earn from short-term investments.c. When the present value of the cashflows is discounted with the appropriate rate end this present value is positive, then the asset providing these cashflows have a value to the investor. d.Cashflows may include depreciatipon expenses and amortization costs.Identify the one true statement. a. The B/C method determines the ratio of the present worth of benefits to the negative of the future worth of the investments. b. The CW method determines the present worth using a finite planning horizon. c. The IRR method determines the interest rate that yields a future worth of zero. d. The ERR method determines the interest rate that yields a present worth of zero.Explain Why you agree or disagree with the following statements. The answer should not be more than 3 sentences. Be specific in your answer and write only the most relevant explanations All other things held constant; the future value of an annuity due is always having a lower future value than an ordinary annuity. A firm should select the capital structure that is fully levered