Question: Question 2 [15 points). A nancial manager is considering evaluating the risk of investing in Microso common stocks. The table below shows monthly returns on

Question 2 [15 points). A nancial manager is considering evaluating the risk of investing in Microso common stocks. The table below shows monthly returns on the stock in year 2020. Month Reurn 202001 7.95% 202002 4.83% 202003 239% 202004 13.63% 202005 2.25% 202006 1 1.37% 202007 0.74% 202008 10.01% 202009 43.51% 202010 8.24% 20201 1 5.73% 202012 4. 1 17% (a) The nancial 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? (b) A client is concerned about variation in returns below the average level. Please indicate the risk measure that the client cares about and compute the risk measure for Microso stock based on the sample of 12 monthly returns. Page 10 of 15 (c) Another client is very loss averse and is extremely concerned about possible substantial loss on her investment. She wants be 99% condence about the possible investment loss. Assuming returns on Microsoft stocks are normally distributed, calculate the relevant risk measure of the stock for the loss averse investor

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