FUND. OF FINANCIAL MGMT CONCISE (LL)
9th Edition
ISBN: 9781337539319
Author: Brigham
Publisher: CENGAGE L
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Chapter 8, Problem 22SP
a.
Summary Introduction
To determine: The average
Risk and Return:
The risk and return are two closely related terms. The risk is the uncertainty attached to an event. In case of any investment, there is some amount of risk attached to it as there can be either gain or loss. While return in the financial term is that percentage which represents the profit in an investment.
Higher risk is associated with higher return and lower risk has a probability of lower return. The investor has to face a tradeoff between risk and return in terms of an investment.
Annual Rate of Return:
The annual rate of return refers to that return which is charged or is earned on an investment for a year. This rate is expressed in percentage.
b.
Summary Introduction
To prepare: The standard deviation for the given data.
Standard deviation:
The standard deviation refers to the stand-alone risk associated with the securities. It measures how much a data is dispersed with its standard value. The Greek letter sigma represents the standard deviation.
c.
Summary Introduction
To determine: The coefficient of variation.
The coefficient of variation:
The coefficient of variation is a tool to determine the risk. It determines the risk per unit of return. It is used for measurement when the expected returns are same for two data.
d.
Summary Introduction
To prepare: A scatter diagram showing the company’s returns and the index returns.
e.
Summary Introduction
To determine: The beta of the B Industries and R Inc. by running regressions of their returns.
f.
Summary Introduction
To determine: The required returns of the two companies by security market line equation.
g.
Summary Introduction
To determine: The beta and the required return for a newly constructed portfolio.
h.
Summary Introduction
To determine: The new portfolio’s required return.
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of Return
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company organizing Las Vegas retreats for investment banks.
Stock Price (end-of-year)
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2019
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2020
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B Focus
MacBook Pro
Review the excerpted table of historic returns shown below. The returns have all been annualized after having calculated monthly returns for the previous ten years. In addition, information is provided about the average, the volatility, and the sensitivity of the possible investments.
Time Period #
Market Return
Firm W
Firm X
Firm Y
Firm Z
T-Bill
1
0.333
0.191
0.218
0.955
0.601
0.035
2
-0.144
-0.423
-0.632
-0.747
-0.472
0.039
3
0.143
0.348
0.470
0.379
0.378
0.040
4
0.316
0.871
0.868
-0.192
0.502
0.036
5
0.178
0.912
0.499
0.694
0.364
0.036
6
-0.014
0.532
0.168
-0.671
-0.064
0.038
…
…
…
…
…
…
…
…
…
…
…
…
…
…
119
0.374
0.556
1.014
0.023
0.698
0.037
120
0.173
0.547
0.092
0.658
0.222
0.036
Average Return
0.082
0.113
0.067
0.167
0.121
0.029
Standard…
Chapter 8 Solutions
FUND. OF FINANCIAL MGMT CONCISE (LL)
Ch. 8 - Suppose you owned a portfolio consisting of...Ch. 8 - Prob. 2QCh. 8 - Prob. 3QCh. 8 - Is it possible to construct a portfolio of...Ch. 8 - Stock A has an expected return of 7%, a standard...Ch. 8 - A stock had a 12% return last year, a year when...Ch. 8 - If investors aversion to risk increased, would the...Ch. 8 - Prob. 8QCh. 8 - In Chapter 7, we saw that if the market interest...Ch. 8 - Prob. 1P
Ch. 8 - PORTFOLIO BETA An individual has 20,000 invested...Ch. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - BETA AND REQUIRED RATE OF RETURN A stock has a...Ch. 8 - EXPECTED RETURNS Stocks A and B have the following...Ch. 8 - PORTFOLIO REQUIRED RETURN Suppose you are the...Ch. 8 - Prob. 8PCh. 8 - REQUIRED RATE OF RETURN Stock R has a beta of 2.0,...Ch. 8 - Prob. 10PCh. 8 - CAPM AND REQUIRED RETURN Calculate the required...Ch. 8 - REQUIRED RATE OF RETURN Suppose rRF = 4%, rM =...Ch. 8 - CAPM, PORTFOLIO RISK, AND RETURN Consider the...Ch. 8 - PORTFOLIO BETA Suppose you held a diversified...Ch. 8 - Prob. 15PCh. 8 - CAPM AND PORTFOLIO RETURN You have been managing a...Ch. 8 - PORTFOLIO BETA A mutual fund manager has a 20...Ch. 8 - EXPECTED RETURNS Suppose you won the lottery and...Ch. 8 - EVALUATING RISK AND RETURN Stock X has a 10%...Ch. 8 - REALIZED RATES OF RETURN Stocks A and 13 have the...Ch. 8 - SECURITY MARKET LINE You plan to invest in the...Ch. 8 - Prob. 22SPCh. 8 - Prob. 23ICCh. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - Select one of the four stocks listed in Question 3...Ch. 8 - Go back to the summary page to see an estimate of...Ch. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Beta pf CPB company Beta of the MSI Company is...
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