CONTEMP. FINANCIAL MGT.-W/MINDTAP V3
14th Edition
ISBN: 9780357292839
Author: MOYER
Publisher: CENGAGE L
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Chapter 8, Problem 3P
a)
Summary Introduction
To determine: The riskier stock from the two stocks and reason.
b)
Summary Introduction
To discuss: Whether there is a change in part (a) when there is a change in both beta values.
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The expected rate of return for the stock of Cornhusker Enterprises is 15 percent, with a standard deviation of 5 percent. The expected rate of return for the stock of Mustang Associates is 10 percent, with a standard deviation of 2 percen
a. Which stock would you consider to be riskier? Round your answers to two decimal places.
The coefficient of variation of returns for Cornhusker's stock:
The coefficient of variation of returns for Mustang's stock:
✓is riskier.
-Select-
b. If you knew that the beta coefficient of Cornhusker stock is 0.9 and the beta of Mustang is 0.6, how would your answer to Part a change?
Looking only at systematic risk -Select-
✓is riskier.
You are reviewing two investment opportunities: the shares of company A and
company B. Company A has a beta of 1.01 and a standard deviation of 20%.
Company B has a beta of 1.30 and a standard deviation of 15%.
Which security has a greater overall risk (choose one)?
Company B
Company A
Which security has a greater systematic risk (choose one)?
Company B
Company A
Which security should offer a higher expected return (choose one)?
Company A
Company B
The expected rate of return for the stock of Cornhusker Enterprises is 20 percent, with a standard deviation of 15 percent. The expected rate of return for the stock of Mustang Associates is 10 percent, with a standard deviation of 9 percent.
a. Which stock would you consider to be riskier? Why?
b. If you knew that the beta coefficient of Cornhusker stock is 1.5 and the beta of Mustang is 0.9, how would your answer to Part a change?
Chapter 8 Solutions
CONTEMP. FINANCIAL MGT.-W/MINDTAP V3
Ch. 8 - Prob. 1QTDCh. 8 - Prob. 2QTDCh. 8 - Prob. 3QTDCh. 8 - Prob. 4QTDCh. 8 - Prob. 5QTDCh. 8 - Prob. 6QTDCh. 8 - Prob. 7QTDCh. 8 - Prob. 8QTDCh. 8 - Prob. 9QTDCh. 8 - Prob. 10QTD
Ch. 8 - Prob. 11QTDCh. 8 - Prob. 12QTDCh. 8 - Prob. 13QTDCh. 8 - Prob. 14QTDCh. 8 - Prob. 15QTDCh. 8 - Prob. 16QTDCh. 8 - Prob. 17QTDCh. 8 - Prob. 18QTDCh. 8 - Prob. 19QTDCh. 8 - Prob. 20QTDCh. 8 - Prob. 21QTDCh. 8 - Prob. 1PCh. 8 - Prob. 2PCh. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - Prob. 5PCh. 8 - Prob. 6PCh. 8 - Prob. 7PCh. 8 - Prob. 8PCh. 8 - Prob. 9PCh. 8 - Prob. 10PCh. 8 - Prob. 11PCh. 8 - Prob. 12PCh. 8 - Prob. 13PCh. 8 - Prob. 14PCh. 8 - Prob. 15PCh. 8 - Prob. 16PCh. 8 - Prob. 17PCh. 8 - Prob. 18PCh. 8 - Prob. 19PCh. 8 - Prob. 20PCh. 8 - Prob. 21PCh. 8 - Prob. 22PCh. 8 - Prob. 23PCh. 8 - Prob. 24PCh. 8 - Prob. 25PCh. 8 - Prob. 26PCh. 8 - Prob. 27PCh. 8 - Prob. 28P
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