The following investments and probabilities are presented: INVESTMENT 1 Years yield probability 1 11 0.25 2 13 0.25 3 19 0.10 4 16 0.20 5 15 0.20 INVESTMENT 2 Years yield PROBABILITY 1 18 0.15 2 16 0.15 3 11 0.40 4 10 0.15 5 11 0.15 1 Calculate the expected return on each investment 2 Calculate the standard deviation of both investments and indicate which investment is riskier and why? 3 Calculate the coefficient of variation of both investments and indicate which investment is riskier and why? In this case it is necessary to calculate this coefficient or with only the standard deviation is sufficient?

The following investments and probabilities are presented: INVESTMENT 1 Years yield probability 1 11 0.25 2 13 0.25 3 19 0.10 4 16 0.20 5 15 0.20 INVESTMENT 2 Years yield PROBABILITY 1 18 0.15 2 16 0.15 3 11 0.40 4 10 0.15 5 11 0.15 1 Calculate the expected return on each investment 2 Calculate the standard deviation of both investments and indicate which investment is riskier and why? 3 Calculate the coefficient of variation of both investments and indicate which investment is riskier and why? In this case it is necessary to calculate this coefficient or with only the standard deviation is sufficient?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 9PROB

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The following investments and probabilities are presented:

INVESTMENT 1
Years	yield	probability
1	11	0.25
2	13	0.25
3	19	0.10
4	16	0.20
5	15	0.20


INVESTMENT 2
Years	yield	PROBABILITY
1	18	0.15
2	16	0.15
3	11	0.40
4	10	0.15
5	11	0.15

1	Calculate the expected return on each investment
2	Calculate the standard deviation of both investments and indicate which investment is riskier and why?
3	Calculate the coefficient of variation of both investments and indicate which investment is riskier and why?
	In this case it is necessary to calculate this coefficient or with only the standard deviation is sufficient?