Both assets depend on the state of the local economy. Three possible developments of the state...
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Both assets depend on the state of the local economy. Three possible developments of the state of the local economy for the next couple of years are relevant. Upsize, downsize and remain. Development state Probability Downsize Remain Upsize 20% 50% 30% Rate of return share company X -2% 6% 10% Rate of return share company Y 2% 4% 7% For decision making the company is only interested in Risk &. Return. Stand dev of asset Y is 4.89! Required: 1 Using only return as decision variable, what asset is preferable? 2 Using only risk as investment criterium, what assets is preferable? Use the standard deviation as a measure of risk. 3 Calculate the Return-Risk ratio and advice in what asset should be invested? 4 What other factor should be considered next to risk and return to determine the best investment for company ABC? Both assets depend on the state of the local economy. Three possible developments of the state of the local economy for the next couple of years are relevant. Upsize, downsize and remain. Development state Probability Downsize Remain Upsize 20% 50% 30% Rate of return share company X -2% 6% 10% Rate of return share company Y 2% 4% 7% For decision making the company is only interested in Risk &. Return. Stand dev of asset Y is 4.89! Required: 1 Using only return as decision variable, what asset is preferable? 2 Using only risk as investment criterium, what assets is preferable? Use the standard deviation as a measure of risk. 3 Calculate the Return-Risk ratio and advice in what asset should be invested? 4 What other factor should be considered next to risk and return to determine the best investment for company ABC?
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1 Using only return as the decision variable For asset X Expected return 02 x 2 05 x 2 03 x 6 022 05... View the full answer
Related Book For
Essentials of Investments
ISBN: 978-0077835422
10th edition
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
Posted Date:
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