Possible outcomes for three investment alternatives and their probabilities of occurrence are given next. Failure Acceptable Successful Alternative 1 Alternative 2 Outcomes Probability Outcomes Probability 50 80 120 Alternative 1 Alternative 2 Alternative 3 Coefficient of Variation 0.20 0.40 0.40 Rank 90 185 205 0.20 0.40 0.40 Using the coefficient of variation, rank the three alternatives in terms of risk from lowest to highest. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Alternative 3 Outcomes Probability 65 0.20 320 420 0.60 0.20

Possible outcomes for three investment alternatives and their probabilities of occurrence are given next. Failure Acceptable Successful Alternative 1 Alternative 2 Outcomes Probability Outcomes Probability 50 80 120 Alternative 1 Alternative 2 Alternative 3 Coefficient of Variation 0.20 0.40 0.40 Rank 90 185 205 0.20 0.40 0.40 Using the coefficient of variation, rank the three alternatives in terms of risk from lowest to highest. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Alternative 3 Outcomes Probability 65 0.20 320 420 0.60 0.20

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 6P

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a. Using the data in the table below alculate the following performance measures.i. Sharpe ratioii. Treynor measureiii. Jensen’s alphaiv. M-squared measurev. T-squared measure, andvi. Appraisal ratio (information ratio) Fund Average return Standard Deviation Beta coefficient Unsystematic Risk A 0.240 0.220 0.800 0.017 B 0.200 0.170 0.900 0.450 C 0.290 0.380 1.200 0.074 D 0.260 0.290 1.100 0.026 E 0.180 0.400 0.900 0.121 F 0.320 0.460 1.100 0.153 G 0.250 0.190 0.700 0.120 Market 0.220 0.180 1.000 0.000 Risk free return 0.050 0.000 b. Out of the performance measures you calculated in part a., which one would you use undereach of the following circumstances:i. You want to select one of the funds as your risky portfolio.ii. You want to select one of the funds to be mixed with the rest of your portfolio,currently composed solely of holdings in the market-index fund.iii. You want to select one of the funds to form an actively managed stock portfolio
Possible outcomes for three investment alternatives and their probabilities of occurrence are given next. Failure Acceptable Successful Alternative 1 Alternative 2 Alternative 3 Outcomes Probability Outcomes Probability Outcomes Probability 50 0.40 70 0.20 85 0.40 0.20 130 0.40 325 0.40 0.40 265 0.40 410 0.20 Alternative 1 Alternative 2 Alternative 3 80 135 Using the coefficient of variation, rank the three alternatives in terms of risk from lowest to highest. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Coefficient of Variation Rank
The expected rate of return of an investment ________. a. equals one of the possible rates of return for that investment b. equals the required rate of return for the investment c. is the mean value of the probability distribution of possible returns d. is the median value of the probability distribution of possible returns e. is the mode value of the probability distribution of possible returns
Possible outcomes for three Investment alternatives and their probabilities of occurrence are given next. \table, Alternative 1, Alternative 2, Alternative 3], [Failure, Outcomes, Probability Outcomes, Probability, Outcomes, Probability], [Acceptable 80, 0.20, 80, 0.40,90, 0.30], [Successful, 70, 0.20, 170,0.40, 290, 0.50]] Using the coefficient of variation, rank the three alternatives in terms of risk from lowest to highest. Note: Do not round Intermeciate calculations. Round your answers to 3. decimal places, table[], \table[[Coefficient of], [Variation]], Rank], [Alternative 1... [Alternative 2,,], [Alternative 3..]]
On the basis of the utility formula below, which investment would you select if you were risk averse with A = 4? Investment Expected return E(r) Standard deviation σ 1 0.12 0.30 2 0.15 0.50 3 0.21 0.16 4 0.24 0.21
If three investment alternatives all have some degree of risk and different expected returns, which of the following measures could best be used to rank the risk levels of the projects? Group of answer choices The standard deviation of returns The coefficient of correlation The coefficient of variation The net present value
Possible outcomes for three investment alternatives and their probabilities of occurrence are given next. Alternative 1 Outcomes Probability Alternative 3 Probability Acceptable Successful 80 135 Altemative 1 Altemative 2 Altemative 3 Using the coefficient of variation, rank the three alternatives in terms of risk from lowest to highest. (Do not round intermediate calculations. Round your answers to 3 decimal places.) Alternative 2 Outcomes Probability Outcomes 70 85 130 325 265 410 Coefficient of Variation
calculate the following Sharpe Ratio (SP) Treynor Measure Jensen Measure M2 measure T2 measure Information Ratio (appraisal ratio) Fund Average return Standard Deviation Beta coefficient Unsystematic Risk A 0.240 0.220 0.800 0.017 B 0.200 0.170 0.900 0.450 C 0.290 0.380 1.200 0.074 D 0.260 0.290 1.100 0.026 E 0.180 0.400 0.900 0.121 F 0.320 0.460 1.100 0.153 G 0.250 0.190 0.700 0.120 Market 0.220 0.180 1.000 0.000 Risk free return 0.050 0.000
Use the following information to answer the question. Based on above data, determine the expected return? Select one: a. 12.06% b. 19% c. 17.35% d. 16.72%
The efficient frontier measures risk by using: Group of answer choices B. Correlation A. Risk-free rates D. Standard deviation C. Beta
Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return, r, is 18.7%; and that the coefficient of variation, CV, is 1.88, answer the following questions: a. Find the standard deviation of returns, sigma Subscript rσr. b. Calculate the range of expected return outcomes associated with the following probabilities of occurrence: (1) 68%, (2) 95%, (3) 99%.
Which one of the following statements is correct? Multiple Choice The risk-free rate of return has a risk premium of 1.0. The reward for bearing risk is called the standard deviation. Risks and expected return are inversely related. The higher the expected rate of return, the wider the distribution of returns. Risk premiums are inversely related to the standard deviation of returns.