Question: If the expected returns of two stocks are the same but the standard deviations of the returns differ, which security is to be preferred?

If the expected returns of two stocks are the same but the standard deviations of the returns differ, which security is to be preferred?

Step by Step Solution

★★★★★

3.38 Rating (167 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

The investor will select the security that offers the highest return fo... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

124-B-A-I (1697).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

Q:

The weekly returns of two stocks for a 13-week period were recorded and are listed here. Assuming that the returns are not normally distributed, can we infer at the 5% significance level that the...

Q:

Closing prices of two stocks are recorded for 50 trading days. The sample standard deviation of stock X is 4.638, and the sample standard deviation of stock Y is 9.084. The sample covariance is...

Q:

Calculate the expected returns of your portfolio Stock Invest Exp Ret A $301 2.6% B $649 19.9% C $497 28%

Q:

Risk and Portfolio Management 167 Chapter 5 3. What are the sources of return on an investment? What are the differences among the expected return, the required return, and the realized return? 4. If...

Q:

2. What is a diversified portfolio? What type of risk is reduced through diversification? How many securities are necessary to achieve this reduction in risk? What characteris-tics must these...

Q:

If the expected returns of two stocks are the same but the standard deviations of the returns differ, which security is to be preferred?

Q:

Intro Suppose that the excess return for all securities can be described by a single index model: Ri= a + BiRm + e The standard deviation of the market portfolio is 18%. Data for securities A, B and...

Q:

1:Suppose that the excess return for all securities can be described by a single index model: R i = i + i R m + e i The standard deviation of the market portfolio is 18%. Data for securities A, B and...

Q:

Problem 6 A late penalty of 10% will apply to new answers. Intro Assume that the single index model is valid. You've collected the following information about excess returns for two stocks, A and B,...

Q:

Assume that the single index model is valid. You've collected the following information about excess returns for two stocks, A and B, their residual standard deviations, and the standard deviation of...

Q:

1. Why did the court conclude that an unoccupied house did not necessarily create a substantial increase in hazard? 2. Why did the court hold that Allstates cancellation of the policy, retroactive to...

Q:

The following information was extracted from the accounts of Essex Corporation at December 31, 2011: CR (DR) Total reported income since incorporation $1,700,000 Total cash dividends paid (800,000)...

Q:

46. LO.2, 5 Bluebird, Inc., does not provide its employees with any tax-exempt fringe benefits. The company is considering adopting a hospital and medical benefits insurance plan that will cost...

Q:

Under the Sales Article of the UCC, the remedies available to a seller when a buyer breaches a contract for the sale of goods may include The right to resell goods identified to the contract The...

Q:

A(n) __________ in an asset is a cash inflow.

Q:

A(n) __________ in liabilities is a cash inflow and a(n) __________ in equity is a cash outflow.

Q:

A firm has the following items on its balance sheet: Cash $ 20,000,000 Inventory 134,000,000 Notes payable to bank 31,500,000 Common stock ($10 par; 1,000,000 shares outstanding) 10,000,000 Retained...

Q:

Can someone help me solve this? You are considering on investment in 30-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Joumal reports that 1-year T-bills...

Q:

1) You have started your first job today, and you want to buy a house within 3 years. You are currently saving for the down payment. You plan to save $5,000 the first year. You also anticipate that...

Q:

---Can you please help me on 8c and all parts of number 9? I have A and B on number 8. Thank you! 8. (9 points possible) Suppose your company needs to raise $10 million to construct a new office...