Carlos will be a senior next year in high school. To celebrate his graduation, his grandmother...
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Carlos will be a senior next year in high school. To celebrate his graduation, his grandmother gave him a sizeable about of money. Since he has scholarships for college, Carlos decided to investigate investing the money in stocks. He talked to a consultant, who explained some of her investment types and their returns as compared to the market average. Carlos's choices were to invest in high- or low-capital stock and domestic or international. The following is a summary of the data for the last quarter High-capital stock Low-capital stock Domestic 250 International 40 200 10 40 6 15 High-capital stock with below-average showing Low-capital stock with below-average showing 1. Draw a Venn diagram and a tree diagram of the data. 2. Using the data, estimate the probability that a high-cap domestic stock performs at or above market average. 3. What type of stock would you suggest Carlos invest in if he wants to limit his risk of the stock performing below market average. Why? 4. Contrast the performance of international and domestic stocks as compared to the market average. 5. Write three facts that help Carlos decide in which types of stocks to invest. Did you use the Venn diagram or the tree diagram to find the facts? Which was most helpful? Why? 6. REFLECTION: List the advantages and disadvantages of the types of models used in this problem. 7. EXTENSION: Assuming Carlos wants to propose to his girlfriend, Melissa, which type of stock should he look to invest in to have a probability of receiving the greatest return? 8. EXTENSION: Javier decides to invest $100 in high-cap domestic stocks. He narrows his choice to stock in Txtel or stock in TxMart, both of which have the same price today. Txtel is a growth stock in the technology sector. It tends to be more volatile. Based on financial analysis, this stock may go down $10 with a probability of 0.4 or up $8 with a probability of 0.6 in the next quarter. TxMart is a value stock in the domestic goods sector. It is projected to drop $4 with a probability of 0.2 or go up $2 with a probability of 0.8. Which stock do you recommend? Why? Carlos will be a senior next year in high school. To celebrate his graduation, his grandmother gave him a sizeable about of money. Since he has scholarships for college, Carlos decided to investigate investing the money in stocks. He talked to a consultant, who explained some of her investment types and their returns as compared to the market average. Carlos's choices were to invest in high- or low-capital stock and domestic or international. The following is a summary of the data for the last quarter High-capital stock Low-capital stock Domestic 250 International 40 200 10 40 6 15 High-capital stock with below-average showing Low-capital stock with below-average showing 1. Draw a Venn diagram and a tree diagram of the data. 2. Using the data, estimate the probability that a high-cap domestic stock performs at or above market average. 3. What type of stock would you suggest Carlos invest in if he wants to limit his risk of the stock performing below market average. Why? 4. Contrast the performance of international and domestic stocks as compared to the market average. 5. Write three facts that help Carlos decide in which types of stocks to invest. Did you use the Venn diagram or the tree diagram to find the facts? Which was most helpful? Why? 6. REFLECTION: List the advantages and disadvantages of the types of models used in this problem. 7. EXTENSION: Assuming Carlos wants to propose to his girlfriend, Melissa, which type of stock should he look to invest in to have a probability of receiving the greatest return? 8. EXTENSION: Javier decides to invest $100 in high-cap domestic stocks. He narrows his choice to stock in Txtel or stock in TxMart, both of which have the same price today. Txtel is a growth stock in the technology sector. It tends to be more volatile. Based on financial analysis, this stock may go down $10 with a probability of 0.4 or up $8 with a probability of 0.6 in the next quarter. TxMart is a value stock in the domestic goods sector. It is projected to drop $4 with a probability of 0.2 or go up $2 with a probability of 0.8. Which stock do you recommend? Why?
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1 Venn Diagram and Tree Diagram Venn Diagram Top circle Highcapital stock Inside this circle Domestic 250 International 40 Bottom circle Lowcapital st... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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