a. On the basis of a review of the return data, which investment appears to be more risky? Why? b. Calculate the standard deviation for each investment's returns. c. On the basis of your calculations in part b, which investment is more risky? Compare this conclusion to your observation in part a.
a. On the basis of a review of the return data, which investment appears to be more risky? Why? b. Calculate the standard deviation for each investment's returns. c. On the basis of your calculations in part b, which investment is more risky? Compare this conclusion to your observation in part a.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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ch4 Q9 practice
Answer Questions A,B,C
Transcribed Image Text:The historical returns for two investments-A and B-are summarized in the following table for the period 2016 to 2020, Use the data to answer the questions that follow.
a. On the basis of a review of the return data, which investment appears to be more risky? Why?
b. Calculate the standard deviation for each investment's returns.
c. On the basis of your calculations in part b, which investment is more risky? Compare this conclusion to your observation in part a.
a. On the basis of a review of the return data, which investment appears to be more risky? Why? (Choose the best answer below.)
A. The riskier investment appears to be investment B, with returns that vary widely from the average relative to investment A, whose returns show less deviation from the average.
B. The riskier investment appears to be investment A, with returns that vary widely from the average relative to investment B, whose returns show less deviation from the average.
C. Investment A and investment B have equal risk because the average returns are the same.
D. The riskier investment appears to be
investment B, with returns that are closer to the average relative to investment A, whose returns are farther from the average.
b. The standard deviation for investment A is
Data table
Year
2016
2017
2018
2019
2020
Average
%. (Round to two decimal places.)
A
Rate of Return
18.9%
- 0.2%
11.1%
26.2%
6.5%
12.5%
B
9.3%
10.9%
12.5%
14.1%
15.7%
12.5%
.
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