 # A compute expected rate of return for each copier b

• 96
• 100% (1) 1 out of 1 people found this document helpful

Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. This preview shows page 33 - 38 out of 96 pages.

(a)Compute expected rate of return for each copier.(b)Compute variance and standard deviation of rate of return for each copier.(c)Which copier should they purchase?Answer:Topic
:Expected Return and Standard Deviation (Equation 5.2 and 5.3)QuestionStatus:Previous Edition33
41)Given the following probability distribution for assets X and Y, compute the expected rate ofreturn, variance, standard deviation, and coefficient of variation for the two assets. Whichasset is a better investment?0.63
Topic:Expected Return, Standard Deviation and Coefficient of Variation (Equation 5.2, 5.3, and 5.4)QuestionStatus:Previous Edition42)Nico bought 100 shares of Cisco Systems stock for \$24.00 per share on January 1, 2002.He received a dividend of \$2.00 per share at the end of 2002 and \$3.00 per share at theend of 2003. At the end of 2004, Nico collected a dividend of \$4.00 per share and sold hisstock for \$18.00 per share. What was Nico's realized holding period return? What wasNico's compound annual rate of return?Explain the difference?
Compound Return:34
\$24=\$2/+\$3/+(\$4+18)/Solve for R either with a calculator or through trial and error. The calculator isapproximately 4.4 percent.The reason the realized holding period return is so much larger than the compound rate ofreturn is that the realized return does not account for the time value of money.Topic:Measuring Single Asset Return (Equation 5.1)QuestionStatus:Previous Edition35
Learning Goal3:Discuss the measurement of return and standard deviation for a portfolioand the concept of correlation.1)An efficient portfolio is a portfolio that maximizes return for a given level of risk orminimizes risk for a given level of return.Topic
:Portfolio Risk and ReturnQuestionStatus:Previous Edition2)New investments must be considered in light of their impact on the risk and return of theportfolio of assets because the risk of any single proposed asset investment is notindependent of other assets.Topic
:Portfolio Risk and ReturnQuestionStatus:Previous Edition3)The financial manager's goal for the firm is to create a portfolio that maximizes return inorder to maximize the value of the firm.
Topic:Portfolio Risk and ReturnQuestionStatus:Previous Edition4)36
Two assets whose returns move in the same direction and have a correlation coefficient of+1 are each very risky assets.Topic
:Portfolio Risk and ReturnQuestionStatus:Previous Edition5)Two assets whose returns move in the opposite directions and have a correlation coefficientof-1 are both either risk-free assets or low-risk assets.

Course Hero member to access this document

Course Hero member to access this document

End of preview. Want to read all 96 pages?

Course Hero member to access this document

Term
Fall
Professor
NoProfessor
Tags
systematic risk
• • • 