Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 7P
Summary Introduction
To determine: The ranking of the alternatives based on the risk, from lowest to highest.
Introduction:
Coefficient of variation:
It is the ratio of SD (standard deviation) to the mean that shows the extent of variability in the data in relation to the mean of the population.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Compute the residual risk measure for portfolio A. Round off your final answer to three digits after the decimal point.Â
Â
Â
Compute the appraisal ratio for portfolio B. Round off your final answer to three digits after the decimal point.
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
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
Chapter 13 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
Ch. 13 - Prob. 1DQCh. 13 - Discuss the concept of risk and how it might be...Ch. 13 - When is the coefficient of variation a better...Ch. 13 - Explain how the concept of risk can be...Ch. 13 - If risk is to be analyzed in a qualitative way,...Ch. 13 - Assume a company, correlated with the economy, is...Ch. 13 - Assume a firm has several hundred possible...Ch. 13 - Explain the effect of the risk-return trade-off on...Ch. 13 - What is the purpose of using simulation analysis?...Ch. 13 - Assume you are risk-averse and have the following...
Ch. 13 - Myers Business Systems is evaluating the...Ch. 13 - Prob. 3PCh. 13 - Prob. 4PCh. 13 - Prob. 5PCh. 13 - Possible outcomes for three investment...Ch. 13 - Prob. 7PCh. 13 - Prob. 8PCh. 13 - Prob. 9PCh. 13 - Prob. 10PCh. 13 - Prob. 12PCh. 13 - Waste Industries is evaluating a 70,000 project...Ch. 13 - Prob. 14PCh. 13 - Debby’s Dance Studios is considering the...Ch. 13 - Prob. 17PCh. 13 - Prob. 18PCh. 13 - Allison’s Dresswear Manufacturers is preparing a...Ch. 13 - Prob. 20PCh. 13 - Prob. 21PCh. 13 - Prob. 22PCh. 13 - Ms. Sharp is looking at a number of different...Ch. 13 - Prob. 25P
Knowledge Booster
Similar questions
- Given the following probability distribution for assets X and Y, compute the expected rate of return, variance, standard deviation, and coefficient of variation for the two assets. Which asset seems to be a better investment?arrow_forwardPlease find the following: The investment's expected return as a percentage: The investment's standard deviation:arrow_forwardRank the 5 alternatives from lowest risk to highest risk using the coefficient of variation.arrow_forward
- Compute the residual risk measure for portfolio B. Round off your final answer to three digits after the decimal point.arrow_forwardThe appropriate measure of risk used in Sharpe's measure of portfolio evaluation is a. Range b. Variance c. Beta d. Standard deviationarrow_forwardAssuming 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%.arrow_forward
- Consider two assets. Suppose that the return on asset 1 has expected value 0.05 and standard deviation 0.1 and suppose that the return on asset 2 has expected value 0.02 and standard deviation 0.05. Suppose that the asset returns have correlation 0.4.Consider a portfolio placing weight w on asset 1 and weight 1-w on asset 2; let Rp denote the return on the portfolio. Find the mean and variance of Rp as a function of w.arrow_forwardExpected return and standard deviation. Use the following information to answer the questions: a. What is the expected return of each asset? b. What is the variance and the standard deviation of each asset? c. What is the expected return of a portfolio with 12% in asset J, 52% in asset K, and 36% in asset L? d. What is the portfolio's variance and standard deviation using the same asset weights from part (c)? Hint: Make sure to round all intermediate answers you will type. a. What is the expected return of asset J? (Round to four decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Return on Asset J in State of Economy Boom Growth Stagnant Recession Probability of State 0.24 0.36 0.21 0.19 State 0.050 0.050 0.050 0.050 Return on Asset K in State 0.230 0.120 0.020 -0.060 Return on Asset L in State 0.250 0.190 0.065 - 0.190arrow_forwardTo determine an optimal portfolio of investments when the available choices are divisible, the investment choices should first be ranked in increasing order based on which of the following? a. FW b. Initial investment c. IRR d. PWarrow_forward
- (a) Calculate the expected cost of investment and the standard deviationarrow_forwardWhich of the following measures the total risk of a​ portfolio?  A. Standard Deviation  B. Correlation Coefficient  C. Beta  D. Alphaarrow_forwardThere are three assets with the rates of return r1 = 214 +2 18+1, r2 = -314+61B –2, r3 = 514 – 1B+4, respectively, where A and B are two independent random events. Find the portfolio of the three assets with the minimum variance and determine its expected return rate.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning