Fundamentals of Financial Management W5A2

# Fundamentals of Financial Management W5A2 - Probability...

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Probability Return Expected return 0.15 6% 0.90% 0.3 5% 1.50% 0.4 11% 4.40% 0.15 14% 2.10% 8.90% return deviation Square of deviation 6 -3 9 5 -4 16 11 2 4 14 5 25 36 54 Standard deviation = (54/3)^.5 4.24 Coefficient of variation 4.24/9 x 100 47% The investment decision is based on the risk and return, the risk with T bills is on lower side but als While the return on secuirities is on higher side but the risk is also. There is a trade off between ris The investment may be made by comibing both elements. However, the return is so high in securt not be ignored, even the lowest return of 5% is higher than 1.9%.

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Fundamentals of Financial Management W5A2 - Probability...

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