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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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- What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns? Note: Notice that the average return and standard deviation must be entered in percentage format. The variance must be entered in decimal format. Year 1 2 3 4 Return (%) Year1: -4.1% Year2: 27.6% Year 3: 12.3% Year 4: 3.6%Stock A has the following returns over the past periods. Calculate the downside risk measured by semi-variance? (answer with 4 decimal spaces) 0.0057 -0.0255 0.0621 -0.0879 -0.0983 0.0813 0.0356 -0.0015 -0.0307 0.0427 0.0297 0.0192The last four years of returns for a stock are as shown here: a. What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns? Note: Notice that the average return and standard deviation must be entered in percentage format. The variance must be entered in decimal format.
- The last four years of returns for a stock are as shown here: E a. What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns? Note: Notice that the average return and standard deviation must be entered in percentage format. The variance must be entered in decimal format. ..... Data table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Year 1 2 3 4 Return - 4.3% + 27.9% + 12.3% + 3.6%If a stock's variance of return is written as σ2, then its standard deviation will be written as:the variance of stock A is .004, the variance of the market .007 and the covariance between the two is .0026. what is the correlation coefficient?
- The last four years of returns for a stock are as shown here: LOADING... . a. What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns? Note: Notice that the average return and standard deviation must be entered in percentage format. The variance must be entered in decimal format. Question content area bottom Part 1 a. What is the average annual return? The average return is enter your response here%. (Round to two decimal places.) Part 2 b. What is the variance of the stock's returns? The variance of the returns is enter your response here. (Round to five decimal places.) Part 3 c. What is the standard deviation of the stock's returns? The standard deviation is enter your response here%. (Round to two decimal places.) figure Year: 1, 2, 3, 4 Return: -4.2%, +27.9%, +11.8%, +3.8%he last four years of returns for a stock are as shown here: LOADING... . a. What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns? Note: Notice that the average return and standard deviation must be entered in percentage format. The variance must be entered in decimal format. Question content area bottom Part 1 a. What is the average annual return? The average return is enter your response here%. (Round to two decimal places.) Part 2 b. What is the variance of the stock's returns? The variance of the returns is enter your response here. (Round to five decimal places.) Part 3 c. What is the standard deviation of the stock's returns? The standard deviation is enter your response here%. (Round to two decimal places.) Time Remaining: 00:26:16 pop-up content starts Data table (Click on the following icon in order…1. Using the following returns, calculate the average returns, the variance, standard deviations, and coefficient of variation for X and Y. Which stock is the least risky? Yr 1 2 3 Rx 12.20 9.65 0.00 6.50 Ry 4 8.00 -2.00 12.50 9.57
- The last four years of returns for a stock are as shown here: a. What is the average annual return? b. What is the variance of the stock's returns? c. What is the standard deviation of the stock's returns? Note: Notice that the average return and standard deviation must be entered in percentage format. The variance must be entered in decimal format. Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 4 Return +3.51% 1 - 4.17% 2 +27.82% 3 + 11.88% XUse the following returns for X and Y. Year 12345 Returns X 21.6% -16.6 9.6 19.2 4.6 Y 25.8% -3.6 27.8 -14.2 31.8 a. Calculate the average returns for X and Y. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a. Average return b. Variance c. Standard deviation b. Calculate the variances for X and Y. Note: Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616. c. Calculate the standard deviations for X and Y. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. X % % % %a. The standard deviation of returns is 0.30 for Stock A and 0.20 for Stock B. The covariance betweenthe returns of A and B is 0.006. The correlation of returns between A and B is: