EBK PRINCIPLES OF MANAGERIAL FINANCE
15th Edition
ISBN: 8220106777916
Author: SMART
Publisher: YUZU
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Question
Chapter 8, Problem 8.3WUE
Summary Introduction
To discuss:
Comparing risk of two investments.
Introduction:
Risk: The risk can be defined as the uncertainty attached to an event such as investment where there is some amount of risk associated to it as there can be either gain or loss.
The standard deviation measures the volatility of the stock. It measures in absolute terms the dispersion of asset risk around its mean.
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.
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Students have asked these similar questions
The expected annual returns are 15% for investment 1 and 12% for investment 2. The standard deviation of the first investment’s return is 10%; the second investment’s return has a standard deviation of 5%.
Which investment is less risky based solely on standard deviation?
investment 1 or 2
Which investment is less risky based on coefficient of variation?
investment 1 or 2
470 - 35
you have concluded that the following relationships are possible next year:
economic status probability rate of return
weak economy .15 -5%
static economy .6 5%
strong economy .25 15%
What is the standard deviation of the rate of return for the one year period?
a. .65 %
b. 1.45%
c. 4%
d. 6.25%
e. 6.4%
The expected annual returns are 15% for investment 1 and 12% for investment 2. The standard deviation of the first investment’s return is 10%; the second investment’s return has a standard deviation of 5%.
A.) Which investment is less risky based solely on standard deviation? (Investment 1 or Investment 2)B.) Which investment is less risky based on coefficient of variation? (Investment 1 or Investment 2)C.) Which is a better measure given that the expected returns of the two investments are not the same? (Coefficient of Variation or Standard Deviation)
Chapter 8 Solutions
EBK PRINCIPLES OF MANAGERIAL FINANCE
Ch. 8.1 - What is risk in the context of financial decision...Ch. 8.1 - Prob. 8.2RQCh. 8.1 - Compare the following risk preferences: (a) risk...Ch. 8.2 - Explain how the range is used in scenario...Ch. 8.2 - Prob. 8.5RQCh. 8.2 - Prob. 8.6RQCh. 8.2 - What does the coefficient of variation reveal...Ch. 8.3 - What is an efficient portfolio? How can the return...Ch. 8.3 - Prob. 8.9RQCh. 8.3 - How does international diversification enhance...
Ch. 8.4 - Prob. 8.11RQCh. 8.4 - Prob. 8.12RQCh. 8.4 - Prob. 8.13RQCh. 8.4 - What impact would the following changes have on...Ch. 8 - Prob. 1ORCh. 8 - Prob. 8.1STPCh. 8 - Prob. 8.2STPCh. 8 - Prob. 8.1WUECh. 8 - Prob. 8.2WUECh. 8 - Prob. 8.3WUECh. 8 - Prob. 8.4WUECh. 8 - Prob. 8.5WUECh. 8 - Prob. 8.6WUECh. 8 - Prob. 8.1PCh. 8 - Prob. 8.2PCh. 8 - Prob. 8.3PCh. 8 - Prob. 8.4PCh. 8 - Prob. 8.5PCh. 8 - Learning Goal 2 P8-6 Bar charts and risk Swans...Ch. 8 - Prob. 8.7PCh. 8 - Prob. 8.8PCh. 8 - Prob. 8.9PCh. 8 - Prob. 8.10PCh. 8 - Prob. 8.11PCh. 8 - Prob. 8.12PCh. 8 - Prob. 8.13PCh. 8 - Prob. 8.14PCh. 8 - Learning Goal 4 P8- 15 Correlation, risk, and...Ch. 8 - Prob. 8.16PCh. 8 - Learning Goal 5 P8- 17 Total, nondiversifiable,...Ch. 8 - Prob. 8.18PCh. 8 - Prob. 8.19PCh. 8 - Prob. 8.20PCh. 8 - Prob. 8.21PCh. 8 - Prob. 8.22PCh. 8 - Prob. 8.23PCh. 8 - Prob. 8.24PCh. 8 - Prob. 8.25PCh. 8 - Prob. 8.26PCh. 8 - Prob. 8.27PCh. 8 - Learning Goal 6 P8- 28 Security market line (SML)...Ch. 8 - Prob. 8.29PCh. 8 - Prob. 8.30PCh. 8 - Prob. 8.31PCh. 8 - Spreadsheet Exercise Jane is considering investing...
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