Ch 5 Lecture Problems w Answers - Bear Mountain Medical...

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Bear Mountain Medical Center must choose one of the following investments: Ecomomy Prob. A B C Poor 25% -10% -9% -5% Average 50% 5% 6% 5% Good 25% 20% 21% 10% Which investment should Bear Mountain select and why?
In a market with : o A risk free rate of 2.0% (and) o A required market return of 7% Find the required return for stocks:
9/1/2014 UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT Chapter 5 -- Financial Risk and Required Return Mini-Case Probability T-Bills Alta Inds. Repo Men Recession 0.1 8.00% -22.0% 28.0% 10.0% -13.0% Below Average 0.2 8.00% -2.0% 14.7% -10.0% 1.0% Average 0.4 8.00% 20.0% 0.0% 7.0% 15.0% Above Average 0.2 8.00% 35.0% -10.0% 45.0% 29.0% Boom 0.1 8.00% 50.0% -20.0% 30.0% 43.0% a. Calculate the expected rate of return on each alternative. b. Calculate the standard deviation of returns on each alternative. c. Calculate the coefficient of variation on each alternative.

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