Chapter 8, Problem 1SE

a)

Summary Introduction

To determine: The expected return for each individual.

Introduction:

In a financial context, the return is seen as a percentage that represents the profit from an investment.

b)

Summary Introduction

To determine: The standard deviation of each asset.

Introduction:

The standard deviation measures the volatility of the stock. It measures in absolute terms the dispersion of asset risk around its mean.

c)

Summary Introduction

To determine: The average return of the portfolio.

Introduction:

Portfolio refers to a set of financial investments such as debentures, stocks, bonds and mutual funds owned by the investor.

d)

Summary Introduction

To determine: The standard deviation of the portfolio.

Introduction:

The standard deviation measures the volatility of the stock. It measures in absolute terms the dispersion of asset risk around its mean.

e)

Summary Introduction

To discuss: The investment preference.

Introduction:

The coefficient of variation is an asset risk indicator that measures the relative dispersion. It describes the volatility of asset returns relative to its mean or expected return.

f)

Summary Introduction

To discuss: The investment preference.

Introduction:

The coefficient of variation is an asset risk indicator that measures the relative dispersion. It describes the volatility of asset returns relative to its mean or expected return.