Question: Risk and return - Implications for managers and investors The concept of risk and return is subjective for different people, as well as for corporations.

Risk and return

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Implications for managers and investors

The concept of risk and return is subjective for different people, as well as for corporations.

Read and assess the following financial decisions. Keeping everything else constant, are the following actions good financial decisions? Base your decisions on the understanding of risk and return, solely from a theoretical finance perspective.

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Scenario

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Juan is a small

-

business owner. He has some cash flow and wants to invest in a new project. Juan's assistant

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provides an evaluation and estimates the nominal returns that Juan would earn if he invests in the project.

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Juan reads the evaluation and makes the decision based on the real terms after factoring in inflation.

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Joe is an average investor. His financial advisor gave him options of investing in a company's stock A

,

with a

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