82292545 Finance.docx - Running head RETRUN AND RISK Return and Risk[Author Name(s First M Last Omit Titles and Degrees[Institutional Affiliation(s

82292545 Finance.docx - Running head RETRUN AND RISK Return...

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Running head: RETRUN AND RISK Return and Risk [Author Name(s), First M. Last, Omit Titles and Degrees] [Institutional Affiliation(s)] Author Note [Include any grant/funding information and a complete correspondence address.]
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RETURN AND RISK2 Introduction Security returns are subject to risk to due fluctuations of market prices. The stock market price will determine the percentage return on the security. Normally, the prevailing economic condition will determine the level of risk on securities market. Risk in a common parlance refers to the chance of unfavorable outcome occurring thus leading to some form of loss. Investor commit funds into securities while being optimistic about the returns. However, it’s advisable to conduct a risk assessment before investing in the stock markets[CITATION Col18 \p 350 \l 1033 ]. This paper, evaluates the risk of a hospital stock to ascertain its viability. Measurement of Risk Risk is measured by comparing the returns of a security under different market conditions. In the instant case, the analysis considers four states of Saudi Arabian economy i.e. booming with a probability of 27%, normal with a probability of 36%, recession with a probability of 27 and depression with a probability of 9%. The return of the hospital stock and these four conditions is 20%, 10%, 5% and -5% for booming, normal, recession and depression respectively. Risk is commonly measured using the expected value method, variance, standard deviation and the coefficient of variation[CITATION Jea151 \p 96 \l 1033 ]. However, this analysis will only consider the first three methods.
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  • Spring '16
  • Mugenda

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