Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Homework Ch 2 - Risk and Return 20. 21. Returns for the Alcoff Company over the last 3 years are shown below. What's the standard

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Homework Ch 2 - Risk and Return 20. 21. Returns for the Alcoff Company over the last 3 years are shown below. What's the standard deviation of the firm's returns? (Hint: This is a sample, not a complete population, so the sample standard deviation formula should be used.) Select the correct answer. a. 17.12% b. 17.15% c. 17.18% d. 17.21% e. 17.24% Stuart Company's manager believes that economic conditions during the next year will be strong, normal, or weak, and she thinks that the firm's returns will have the probability distribution shown below. What's the standard deviation of the estimated returns? (Hint: Use the formula for the standard deviation of a population, not a sample.) Select the correct answer. a, 18.32% b. 17.84% c. 18.08% d. 18.80% e. 18.56% Assume that your cousin holds just one stock, Eastman Chemical Bonding (ECB), which he thinks has very little risk. You agree that the stock is relatively safe, but you want to demonstrate that his risk would be even lower if he were more diversified. You obtain the following returns data for Wilder's Creations and Buildings (WCB), Both companies have had less variability than most other stocks over the past 5 years. Measured by the standard deviation of returns, by how much would your cousin's risk have been reduced if he had held a portfolio consisting of 20% in ECB and the remainder in WCB? (Hint: Use the sample standard deviation formula.) Average return = Standard deviation = Select the correct answer. a. 239% b. 2.42% c. 245% a. 2.39% b. 2.429 C. 2.45% d. 2.48% e. 2.51%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Investing In Fixed Income Securities Understanding The Bond Market

Authors: Gary Strumeyer

1st Edition

0471465127, 9780471465126

More Books

Students also viewed these Finance questions

Question

What are some methods used to estimate a business's cost of debt?

Answered: 1 week ago

Question

e. What are the programs research and clinical focus areas?

Answered: 1 week ago