Are the unfavorable variances always bad? Are the favorable variances always good? Why

Q: Why will the standard deviation not be a good measure of risk when returns are negatively skewed

A: The standard deviation of returns is a measure of the volatility of market returns and determines…

Q: What happens to the SML graph when risk aversion increasesor decreases?

A: Risk Aversion: The ability of a human being to avoid the risk and eventually reducing losses that…

Q: Why is the variance (or standard deviation) used as a measure of risk? What are the advantages and…

A: Reasons of utilizing variance as a risk measure: While consider a lesser risk in investment, fewer…

Q: What can be understood by abnormal return?

A: Note firstly we understand what is meaning of abnormal return. Basic meaning of abnormal return is…

Q: What are the steps in computing the cost of a prediction error when using the EOQ decision model?

A: Economic Order Quantity (EOQ): Economic order quantity is the quantity of order that is purchased…

Q: Q.How does variance analysis help in continuous improvement?

A: Variance Analysis:  Variance analysis is the process of ascertaining the deviations between actual…

Q: What is meant by the term abnormal rate of return?

A: Abnormal rate of return is return earned above or below the normal rate of return.

Q: Is an higher NPV better than a lower NPV and why?

A: The net present value is the difference between sums of the present value of cash inflows and…

Q: Why is the additional risk not taken without expected additional return?

A: The risk-return tradeoff takes note of that the potential return increments with an expansion in…

Q: Explain the difference between a linear risk and a nonlinear risk.

A: Linear risk is an enterprise's risk, based on the traditional economic system of "take-up-dispose."…

Q: How does the use of scenarios differ from sensitivity analysis?

A: Sensitivity analysis and scenario analysis are the assessment techniques that are used in investment…

Q: Explain why the volatility is considered to be the most critical variable in the Black Scholes…

A: Options contracts are a kind of financial derivative that involves the agreement between two parties…

Q: Is a negative Sharpe ratio good or bad?  EXPLAIN

A: What sharpe ratio measure? It measure the excess return earn by portfolio over risk free rate at…

Q: What is Projected Misstatement?

A:

Q: What is the difference between positive and negative predictive value?

A: Positive predictive value is the probability that subjects with a positive screening test truly have…

Q: Explain Measures of Variance and Risk?

A: Variance tests normal or normal variability. Variability is volatility for investors, and volatility…

Q: What is standard deviation? What type of risk does it measure

A: Standard deviation measures the risk of an investment regarding how it will fluctuate or deviate…

Q: When we work with the breakeven point, how important is it to understand what a decision variable…

A: The question is related to Marginal Costing. The break-even point is that level of sales at which…

Q: How is VaR used to limit risk?

A: Value at Risk (VaR) a statistical tool which measures and quantifies financial risk a firm or…

Q: What risk does Beta measure?

A: There are two types of risks: 1) Systematic risk 2) Unsystematic risk 1. Systematic risk : It is…

Q: t is objective?...

A: Objective vs subjective trading: Most traders follow either an essentially objective or subjective…

Q: What is the Variance of returns for Security XYZ?

A: Outcome Probability Return A 20% 20% B 80% 25%   Expected return = (Probability of…

Q: How is breakeven analysis different from CVP analysis?

A: Breakeven analysis: It helps to analyze the break-even level of company that is, the level of…