Answered: 20. Determine the associated risk…

20. Determine the associated risk measure in this equipment investment in terms of standard deviation. A) $4,923 B) S6,123 C) $4437.8 D) $8,523 Answer: C Refer to: Table 10

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

See similar textbooks

Related questions

Q: alternatives с D B Alternatives alternatives have the following returns and standard deviations of…

A: The coefficient of variation (CV) is a statistical measure used to measure the relative variability…

Q: Refer to the table below to answer the following question. Project Initial Investment NPV P 200…

A: Profitability index is the ratio of present value of cash inflows and present value of cash…

Q: The net present value of a project: Ⓒa. O b. Is an absolute metric of value and ignores the timing…

A: The net present value (NPV) is a measure of relative valuation that takes into account when a…

Q: • If the actual value of a time series at time t and the forecast value for time t is denoted by At…

A: Option A: The correct formula for Mean Absolute Deviation Option B: It is the formula for Mean…

Q: Coefficient of Variation

A: Please note that I'm assuming that we need to calculate the Coefficient of variation of the 2…

Q: Risk-Adjusted Performance Measures Sharpe Ratio Treynor's Measure Information Ratio A 0.4750 -0.0082…

A: Risk adjusted measures are used to determine the reward an investor would get for taking that amount…

Q: Expected value of profit Standard deviation of profit Coefficient of variation of profit Project A…

A: Standard deviation is absolute measure of risk. Higher the standard deviation, higher the risk.…

Q: If you perform a NPV analysis on a perspective investment using a "d" = 15% and: a. the…

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: 3. List at least 5 investment instruments based on your risk tolerance.

A: My risk tolerance is low and based on this I will invest in those instruments that have a low risk…

Q: 1.What is sensitivity analys 2. What is long range plan? 3. What is a capital budgeting?

A: Define Sensitivity analysis Sensitivity analysis is a tool to examine the values of an independent…

Q: What is the total variance of the following portfolio including 2 assets invested in the ratio of…

A: Formula to be used: Portfolio variance=(WA2 x σ2A)+(WB2 x σ2B)+ (2 x WA x σA x WB x σB x r) Data…

Q: Review the table below listing performance metrics for selected assets. The metrics are defined in…

A: The table provides performance metrics for four assets: a riskless asset, the market portfolio, and…

Q: apital Budgeting using Net Present Value Method V of Cost of Investment V of Net Cashflow: Year 1 2…

A: Net present value is most common used capital budgeting method and can be calculated as difference…

Q: The Capital Asset Pricing Model asserts that the return is equal to the risk-free rate plus a risk…

A: CAPM return is called as Capital Asset pricing method. It is calculated by using the given below…

Q: For minimum variance portfolio,the weight of Asset A1 Ltd in two asset portfolio ,having correlation…

Q: None

A: Dear student, I have provided an answer and explanation to your assignment. Please pay close…

Q: bility pution Flow of ct A .10 .20 .40 13000 13500 14000 Flow of ct B 12000 13000 14000 equired to…

A: Note : As per the guidelines, only first three parts will be answered. Kindly post the remaining…

Q: 10.Which one of the following statements best describes the most likely impact that a profitable…

A: Capital budgeting techniques help in determining which project should be chosen amongst the all…

Q: 8. (6) If RL equals 5%, what is the preferred investment using Roy's safety-first criterion for the…

A: Roy's safety first criterion: Roy's safety first criterion sets a threshold limit based on an…

Q: Which of the following assets dominates Asset X that has 9% expected return andstandard deviation of…

A: The objective of the question is to identify which asset among Asset V, Asset R, Risk-free asset,…

Q: A firm is looking to evaluate the income coming from a project. The project has a lowest possible…

A: Expected income The expected income is calculated as shown below. Expected income=First…

Q: Q10) Capital budgeting involves ____________ decisions in purchasing ____________ assets. Group of…

A: The company makes investments to increase its earnings and achieve growth. The company has different…

Q: (8) Consider projects A and B with the following forecasted net present values sensitive to the…

A: Here, Scenario I (p=0.3) II (p=0.7) A (mil.Lei) 3 4 B (mil.Lei) 2 6

Q: which of the following do you need to know to calculate the IRR of a project?. 1. project's…

A: Companies use capital budgeting techniques to evaluate the projects. IRR is internal rate of return.…

Q: 10- For which of the following types of investment is it possible to calculate your realised…

A: Realised rate of return is the net amount of earnings that an investor realises on his investment…

Q: Calculate the required rate of return by using CAPM based on the data below. DATA Risk-free rate =…

A: In this question we need to compute required rate of return by using CAPM: As per Capital Asset…

Q: a rational investor would choose:

A: Standard Deviation: It measures the variation for a set of values. It also indicates the risk of…

Q: Consider the following information: Security A Security B Standard Deviation 15% 35% Beta 1.55 0.90…

A: Standard Deviation Beta Security A 15% 1.55 Security B…

Q: Which of the following should you focus when assessing the NPV of a project for a MNC? I.…

A: Net Present Value (NPV) is the technique of capital budgeting which defines the profitability of the…

Q: 5. Data for the 6 major cost items of a certain construction project are given in the following…

A: Net risk is the max risk adjusted for probability of max risk. Net risk = Max risk * probability…

Q: e financial manager's financing function?

A: First option is wrong because monitoring trends in operating expenses will help in determining the…

Q: Assume that Allied’s average project has a coefficient of variation (CV) in the range of 1.25 to…

A: Average Project Coefficient of variation range = 1.25 to 1.75

Q: With respect to an investor's utility function expressed as: U = E(r) –Ao², which of the following…

A: Utility Function = Er-12Aσ2 where A is -4, 0 and 4

Q: The measures of risk include Geometric Mean Arithmetic Mean Median Variance

A: The risk is very important in the stock market and we must quantify the risk so that it can be…

Q: estiöñ 15 Question 18 A firm with a 14 percent WACC is evaluating two projects for this year's…

A: (Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: Given the following values for asset characteristics, compute the values of the weights for assets…

Q: Which of the following are measures of risk? Question 8 options: 1) Expected value and standard…

A: Risk measures can be used to perform risk assessment.

Q: None

A: Option a: This option is incorrect because time value of money is the expression of the value of…

Q: Asset A has an expected return of 20% and a standard deviation of 25%. The risk-free rate is 12%.…

A: Reward to variability ratio = WhereRa = expected return of asset ARf = risk free rate = Standard…

Q: Calculate the project's coefficient of variation. (Hint: Use the expected NPV.) Squared dev. Prob.…

A: Financial statements are statements which states the business activities performed by the company .…

Q: a) XVW Ltd. currently holds a portfolio containing two assets; Asset 1 and Asset 2. If Er1 = 0.25,…

A: A Minimum Variance Portfolio (MVP) is a concept in finance and investment that refers to a portfolio…

Q: q8. What are the acceptance criteria for IRR and NPV? What weaknesses are commonly associated with…

A: Internal rate of return: Internal rate of return refers to the discount rate at which the net…

Q: 10. Generally, the cost of risk takes the forms of A. reputational cost, emotional cost and…

A: Hi There. Thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: Suppose the consumer has a Mean-Variance utility, u(ra, 0₂) = −(9% — rz)² – o², and there are a…

A: The necessary rate of return on an organization's investments to meet the demands of its capital…

Q: Given an optimal risky portfolio with expected return of 12%, standard deviation of 23%, and a risk…

A: An ideal portfolio is one that minimizes risk for a given level of return or maximizes return for a…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Reference: Table
First Cost, $
$60,000 S80,000
S100,000 $120,000
Probability
0.25
0.35
0.30
0.10

20. Determine the associated risk measure in this equipment investment in terms of standard
deviation.
A) $4,923
B) S6,123
C) $4437.8
D) $8,523
Answer: C
Refer to: Table 10

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step 5

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

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%.
P8–28 Security market line (SML) Assume that the risk-free rate, RF, is currently 9% and that the market return, rm, is currently 13%. Draw the security market line (SML) on a set of “nondiversifiable risk (x-axis)–required return (y-axis)” axes. Calculate and label the market risk premium on the axes in part Given the previous data, calculate the required return on asset A having a beta of 0.80 and asset B having a beta of 1.30. Draw in the betas and required returns from part cfor assets A and B on the axes in part Label the risk premium associated with each asset and discuss them.
Given the following information, compute the standard deviation for Investment A: Payoff Probability 30% 0.6 15% 0.3 -12% 0.1 Group of answer choices a. None of these are correct b. 6% c. 9% d. 13%
15 Why is it important to make the distinction between company required rate of return (WACC) and project required rate of return when evaluating projects? Fill in your answer here Help Format B IU x, x² L EX 4 Q 11 !! 3
14. Consider the following possible returns over the next year on an asset Return probability -£40 0.5 £40 0.5 What is the variance of return of the asset.
Seidsmong ed liw onon aysh bajosios vimobnsi à to Juo ferit vtilidadorq adi ai tsrW Task 2: Assume that a risk manager estimates the following probabilities of various losses for a certain risk: Amount of Loss, EUR Probability of Loss 0.40 0.60 225 350 1. Given the probability distribution, find the expected loss.
QUESTION 36 When evaluating an investment or project, Companies need to consider risk as a factor because: OA. A. All projects carry the same level of risk B. B. All projects do not carry the same level of risk C.C. Risk allows a company to measure the relative Net Present Value of an investment OD. D. Both B & C QUESTION 37 The Coefficient of Variation is the best measure of risk because: OA. A. It is a relative measure of risk, allowing companies to measure projects with different expected values. B. B. Is an absolute measure of risk O C.C. Is harder to calculate OD. D. Is never used QUESTION 38 Standard Deviation is an absolute measure of risk because A. It allows companies to measure projects with different expected values B. It measures risk in an absolute fashion, risk is measure based on the expected value. C.It can only be used to compare projects with the same expected value. D. Both B & C
8- Which of the following methods of capital budgeting uses the average annual profits for evaluation of projects? a. Payback period b. Net present value c. Accounting Rate of return d. Internal rate of return
Problem 13-6 (Algo) Coefficient of variation [LO13-1) Possible outcomes for three investment alternatives and their probabilities of occurrence are given next. Alternative 1 Alternative 2 Outcomes Probability Outcomes Probability 0.20 0.40 0.40 Failure Acceptable. Successful Alternative 1 Alternative 2 Alternative 31 50 80 120 Coefficient of Variation 8.20 0.40 0.40 Rank 98 185 205 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. 2 Drau Alternative 3 Outcomes 65 320 420 5 of 9 Probability 8.20 0.60 0.20 # Next >
Calculate the project's coefficient of variation. (Hint: Use the expected NPV.) Squared dev. Prob. NPV NPVI - E{NPV) Squared deviation times probability 0.24 S6,289.81 $5,829 SS 0.24 -$2,390.74 -S2,852 SS 0.32 -S1,233.33 -S1,694 $$ 0.20 -$ 400.00 -$861 SS 1.00 $ 461.11 Variance S Standard deviation $ 5.87 6.52 7.25 7.97 8.77
26.1 (g, h, i)
Computing Present and Future Values Under Different Assumptions Determine the unknown variables in each of the four separate investment scenarios. Round the RATE to one percentage point (for example, enter 8.5 for 8.54444%). Round NPER, PV, and PMT to the nearest whole number. Use a negative sign only for an amount related to PMT. Investment 1 Investment 2 Investment 3 Investment 4 RATE Answer 7% 6% 1% NPER 10 Answer 4 24 PV $216,000 $9,000 Answer $21,600 PMT $(35,000) $(2,300) $(16,200) Answer TYPE End of period Beg. of period End of period Beg. of period

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS