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Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
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- You want to estimate the mean amount of time Internet users spend on Facebook each month. How many Internet users must be surveyed in order to be 95% confident that your sample mean is within 15 minutes of the population mean? Based on results from a prior Nielsen survey, assume that the standard deviation of the population of monthly times spent on Facebook is 210 min. 249 753 1267 898 1432Assume that the traffic to the web site of Smileys People, Inc., which sells customized T-shirts, follows a normal distribution, with a mean of 4.5 million visitors per day and a standard deviation of 820,000 visitors per day. a. What is the probability that the web site has fewer than 5 million visitors in a single day? b. What is the probability that the web site has 3 million or more visitors in a single day? c. What is the probability that the web site has between 3 million and 4 million visitors in a single day? d. Assume that 85% of the time, the Smileys People web servers can handle the daily web traffic volume without purchasing additional server capacity. What is the amount of web traffic that will require Smileys People to purchase additional server capacity?A website owner has data on the total number of log-ins to a website for 20 different randomly selected users from 2018. The owner would like to know, with 95% confidence, an interval that contains the mean number of log-ins of all users of the website in 2018. Without actually calculating the confidence interval, name and briefly explain two techniques you'd use to calculate it.
- You may need to use the appropriate appendix table or technology to answer this question. A government agency provides the number of miles that residents of the 75 largest metropolitan areas travel per day in a car. Suppose that for a simple random sample of 50 City A residents the mean is 22.9 miles a day and the standard deviation is 8.7 miles a day, and for an independent simple random sample of 40 City B residents the mean is 18.6 miles a day and the standard deviation is 7.7 miles a day. (a) What is the point estimate of the difference between the mean number of miles that City A residents travel per day and the mean number of miles that City B residents travel per day? (Use City A − City B.) __________ mi/dayHow many computers? In a simple random sample of 155 households, the sample mean number of personal computers was 2.06. Assume the population standard deviation is σ = 0.4.A linear regression model is Units = 4,004 – 0.659×Week. For week 46, what is the forecast for the number of units? Round your answer to the nearest whole number. units
- A telephone call center where people place marketing calls to customers has a probability of success of 0.09. Find the number of calls needed to ensure that there is a probability of at least 0.79 of obtaining seven or more successful calls. (Hint: Start by checking the probability of seven or more successful calls in 80 calls.) The number of calls needed to ensure that there is a probability of at least 0.79 of obtaining seven or more successful calls is ☐ (Type a whole number.)The following time series shows the sales of a particular product over the past 12 months. Construct a time series plot. What type of pattern exists in the data? Use α = 0.3 to compute the exponential smoothing values for the time series. Use trial and error to find a value of the exponential smoothing coefficient α that results in a relatively small MSE.For the Hawkins Company, the monthly percentages of all shipments received on time over the past 12 months are 80, 82, 84, 83, 83, 84, 85, 84, 82, 83, 84, and 83. Construct a time series plot. What type of pattern exists in the data? Compare a three-month moving average forecast with an exponential smoothing forecast for α = 0.2. Which provides the better forecasts using MSE as the measure of model accuracy? What is the forecast for next month?
- A marketing professor at Givens College is interested in the relationship between hours spent studying and total points earned in a course. Data collected on 156 students who took the course last semester are provided in the tile MktHrsPts. Develop a scatter chart for these data. What does the scatter chart indicate about the relationship between total points earned and hours spent studying? Develop an estimated regression equation showing how total points earned is related to hours spent studying. What is the estimated regression model? Test whether each of the regression parameters β0 and β1 is equal to zero at a 0.01 level of significance. What are the correct interpretations of the estimated regression parameters? Are these interpretations reasonable? How much of the variation in the sample values of total point earned does the model you estimated in part (b) explain? Mark Sweeney spent 95 hours studying. Use the regression model you estimated in part (b) to predict the total points Mark earned.Consider the following time series data: Construct a time series plot. What type of pattern exists in the data? Use a multiple regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data: Qtr1 = 1 if quarter 1, 0 otherwise; Qtr2 = 1 if quarter 2. 0 otherwise; Qtr3 = 1 if quarter 3, 0 otherwise. Compute the quarterly forecasts for next year based on the model you developed in part (b). Use a multiple regression model to develop an equation to account for trend and seasonal effects in the data. Use the dummy variables you developed in part (b) to capture seasonal effects and create a variable t such that t = 1 for quarter 1 in year 1, t = 2 for quarter 2 in year 1, … t = 12 for quarter 4 in year 3. Compute the quarterly forecasts for next year based on the model you developed in part (d). Is the model you developed in part (b) or the model you developed in part (d) more effective? Justify your answer.In a recent report, the top five most-visited English-language web sites were google.com (GOOG), facebook.com (FB), youtube.com (YT), yahoo.com (YAH), and wikipedia.com (WIKI). The most-visited web sites for a sample of 50 Internet users are shown in the following table: a. Are these data categorical or quantitative? b. Provide frequency and percent frequency distributions. c. On the basis of the sample, which web site is most frequently the most-often-visited web site for Internet users? Which is second?