Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, nd then calculate average returns over the five-year period. (Hint: Remember, returns are alculated by subtracting the beginning price from the ending price to get the capital gain or ss, adding the dividend to the capital gain or loss, and dividing the result by the beginning rice. Assume that dividends are already included in the index. Also, you cannot calculate the te of return for 2014 because you do not have 2013 data.) ata as given in the problem are shown below: Goodman Industries Stock Price $25.88 $22.13 $24.75 $16.13 Year 2019 2018 2017 2016 2015 2014 2019 2018 דורת Dividend $1.73 $1.59 $17.06 $11.44 le now calculate the rates of return for the two companies and the index: Goodman $1.50 $1.43 $1.35 $1.28 Landry Incorporated Stock Price $73.13 $78.45 $73.13 $85.88 $90.00 $83.63 Landry Index Market Index Dividend Includes Divs. $4.50 17,495.97 $4.35 13.178.55 $4.13 13,019.97 $3.75 9.651.05 $3.38 8,403.42 $3.00 7,058.96 b. Calculate the standard deviation of the returns for Goodman, Landry, and the Market Index. (Hint: Use the sample standard deviation formula given in the chapter, which corresponds to the STDEV function in Excel.) Since this is not a weighted average, use the function wizard to calculate the standard deviations. Standard deviation of returns c. Construct a scatter diagram graph that shows Goodman's and Landry' returns on the vertical axis and the Market Index's returns on the horizontal axis. It is easiest to make scatter diagrams with a data set that has the X-axis variable in the left column, so we reformat the returns data calculated above and show it just below. Year 0 0 Goodman Landry Index 0 0 0 Index Goodman 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Landry 0.0% 0.0% 0.0% 0.0% 0.0%

2. Stock prices and stand-alone risk Risk is the potential for an investment to generate more than one return. A security that will produce only one known return is referred to as a risk-free asset, as there is no potential for deviation from the known expected outcome. Investments that have the chance of producing more than one possible outcome are called risky assets. Risk, or potential variability in an investment's possible returns, occurs when there is uncertainty about an investment's future outcome, such as the return expected to be generated by the investment and realized by an investor. Generally, investors would prefer to invest in assets that have: O A higher-than-average expected rate of return given the perceived risk O A lower-than-average expected rate of return given the perceived risk Read the following descriptions and identify the type of risk or term being described: Description This type of risk relates to the possibility that a firm will not be able to service its…

The systematic risk principle states that the expected return on a risky asset depends only on which one of the following? Unsystematic risk Market risk Diversifiable risk

Risks that are insurable because their probabilities can be calculated precisely enough for the risk to be quantified. a) Speculative b) Explicit c) Measured d) Pure