An investor A has a well-diversified portfolio. What risk measure is the most relevant in this...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
An investor "A" has a well-diversified portfolio. What risk measure is the most relevant in this case, standard deviation or beta? Why? Explain! If risk-free rate is 4% beta of stock ABC is 1.5, and expected return on the market is 8%, what is the required rate of return on stock ABC? Now, assume you expect to realize an annual return of 12% by holding ABC, should you buy it or not, why? Explain. An investor "A" has a well-diversified portfolio. What risk measure is the most relevant in this case, standard deviation or beta? Why? Explain! If risk-free rate is 4% beta of stock ABC is 1.5, and expected return on the market is 8%, what is the required rate of return on stock ABC? Now, assume you expect to realize an annual return of 12% by holding ABC, should you buy it or not, why? Explain.
Expert Answer:
Answer rating: 100% (QA)
Answer Explanation Part 1 Beta will be the most relevant factor to analyze the portfolio risk here T... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-1337395250
15th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
Students also viewed these finance questions
-
Assume that you recently graduated with a major in finance and that you have just landed a job as a financial planner with Barney Smith Inc., a large financial services corporation. Your first...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Differentiate each trigonometric identity to obtain a new (or familiar) identity. sin x (a) tan x cos x (b) sec x= cos x I + cot x (c) sin x + cos x = cse x
-
Focus on the differences in motivation, ideology and culture behind the terrorist, as well as the ordinary criminal. What motivates the terrorist? Identify at least three causes and motivations of...
-
Rode Inc. incurred a net operating loss of $500,000 in 2022. The tax rate for all years is 20%. Prepare the journal entries to record the benefits of the loss carryforward. Rode has evidence that it...
-
The following are the financial statements for Nailsea plc for the years ended 30 June 2014 and 2015: There were no disposals of non-current assets in either year. Dividends were paid in 2014 and...
-
Following are typical questions that might appear on an internal control questionnaire for investments in marketable securities. 1. Is custody of investment securities maintained by an employee who...
-
"Rami & Esam Company on December 31 has cash $20,000, noncash assets $100,000, abses $55,000, and the fubowing share capital balances Rami $45 000 and Esas 120 000 The Smagunda 25 points Save Answer...
-
By the year 2021, the European Union will have a database of fingerprints, photographs for facial recognition, passport numbers and birth dates of all its 350 million citizens. Data that are...
-
Question 31 of Your local coffee shop is extremely busy, so the cashier asks what you'd like to order and your name. The cashier writes this information onto a cup and passes it to the barista. After...
-
What is the suitable voltage for desalting? What are the effects of increasing and decreasing of the voltage above and below the optimum voltage ?
-
Write a program to print below pattern?
-
Jhon Ltd is a private company, considering an initial investment of $500,000 which generates $100,000 cash inflows for 7 years. Calculate the discount payback period discount rate given is 8%. when
-
A satellite traveling at 8.2 km/s at perigee fires a retrorocket at perigee altitude of 480 km. What delta-v is necessary to reach a minimum altitude of 100 miles during the next orbit?
-
What are the ethical considerations surrounding project governance structures and project leadership responsibilities, particularly in relation to accountability, transparency, and stakeholder trust ?
-
Visit the CareerOneStop website and take the Work Values Assessment. Complete a review of the findings from the Work Values Assessment , and write a summary of the findings. Specifically address ho...
-
On April 29, 2015, Auk Corporation acquires 100% of the outstanding stock of Amazon Corporation (E & P of $750,000) for $1.2 million. Amazon has assets with a fair market value of $1.4 million (basis...
-
In the spring of 1984, Disney Productions stock was selling for about $3.125 per share. (All prices have been adjusted for 4-for-l splits in 1986 and 1992.) Then Saul Steinberg, a New York financier,...
-
Suppose there were no IRS restrictions on what constitutes a valid lease. Explain in a manner that a legislator might understand why some restrictions should be imposed.
-
Refer to problem 11-1. What is the projects IRR?
-
Fribourg Instrument. Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 300 pressure gauges were produced, and overhead costs...
-
Capital budgeting has three phases: (1) identification of potential investments, (2) selection of investments, and (3) postaudit of investments. What is the accountants role in each phase?
-
Describe how internal consistency is achieved when considering inflation in a capital-budgeting model.
Study smarter with the SolutionInn App