Question: (3 pts.) Your uncle tells you that he thinks Dynamic Electron Inc. is a great buy because it offers a return of 10% with a

(3 pts.) Your uncle tells you that he thinks Dynamic Electron Inc. is a great buy because it offers a return of 10% with a variance of only 0.02, making the stock's risk far lower than its return. Explain to your uncle what is wrong in his calculations and how to fix it? (there is more than one way in which this analysis is off, identifying one flaw is enough for full credit).

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!