A financial manager is considering evaluating the risk of investing in Microsoft common stocks. The table...

 

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A financial manager is considering evaluating the risk of investing in Microsoft common stocks. The table below shows monthly returns on the stock in year 2020. Month 202001 202002 202003 202004 202005 202006 202007 202008 202009 202010 202011 202012 Return 7.95% -4.83% -2.39% 13.63% 2.25% 11.37% 0.74% 10.01% -6.51% -3.74% 5.73% 4.17% (a) The financial manager does not want to use standard deviation to measure investment risk of the stock. What are the three major problems of standard deviation as a measure of risk? A financial manager is considering evaluating the risk of investing in Microsoft common stocks. The table below shows monthly returns on the stock in year 2020. Month 202001 202002 202003 202004 202005 202006 202007 202008 202009 202010 202011 202012 Return 7.95% -4.83% -2.39% 13.63% 2.25% 11.37% 0.74% 10.01% -6.51% -3.74% 5.73% 4.17% (a) The financial manager does not want to use standard deviation to measure investment risk of the stock. What are the three major problems of standard deviation as a measure of risk?

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a The three major problems of standard deviation as a measure of risk are 1 It assumes a symmetrical distribution Standard deviation assumes that the ... View the full answer