Consider an economy with two types of firms, S and I. S firms always move together, but I firms move independently of each other. For both types of firms there is a 40% probability that the firm will have a 20% return and a 60% probability that the firm will have a -30% return. The standard deviation for the return on an individual firm is closest to

Q: A firm has a choice between 2 investment proposals. Using the information in the table below, which…

A: Since the required return is equal for both investments, we can determine which investment gives…

Q: Table 2: Efficient Frontier Table Expected Return Stdev Stocks, w1 0.00 0.10 0.20 0.30 0.40 0.50…

A: For each of the given weights, we can determine the portfolio return and standard deviation using…

Q: Using the key value driver formula, what is the enterprise value in each scenario?

A: key driver formula scenario 1---->                                                      Value=…

Q: You observe the following: ABC Inc. has 1.8 Beta and .2 Expected return XYZ Inc has 1.6 Beta and .19…

A: The financial ratios are used to measure the financial attractiveness and economic feasibility of…

Q: Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%, and…

A: As per the given information: Risk-free rate - 6% Standard deviation - 43% Portfolio Beta on F1…

Q: Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%, and…

A: Beta on F1 in A = 1.5Beta on F2 in A = 1.9Expected return of A = 31%Beta on F1 in B = 2,5Beta on F2…

Q: Stuart Company's manager believes that economic conditions during the next year will be strong,…

A: Calculation of Mean return of stock fund.Scenario Probability (a)Stock fund rate of return (b)Mean…

Q: sing the single factor model for firm with a Beta of 1 and when the standard deviationof the market…

A: If the beta of a firm's stock is 1, it means there is a risk or standard deviation of the firm…

Q: Argo, a firm organizing adventure travel, has returns that vary with the economy. Argo predicts that…

A: Variance, a statistical metric, gauges the extent of dispersion or variability within a dataset by…

Q: coefficient of variation?

A: Co-efficient of variation is the risk as a percentage of return. It can be said that it is ratio of…

Q: The SML implies​ that if you could find an investment with a negative​ beta, its expected return,…

A: As per Security Market Line(SML), E(k) = kf + [ b x (E(kM) - kf) ]WhereE(k)= Expected return on…

Q: Calculate the expected return. Do not round intermediate calculations. Round your answer to two…

A: The answers and the explanation can be seen below:

Q: Emmons Corporation has a 0.0 probability of a return of 0.49, a 0.4  probability of a rate of return…

A: Expected Return is computed asRemaining probability = 1- (0.0 + 0.4) = 0.6Expected Return = (0.0 *…

Q: You are a financial analyst, and you are tasked with calculating the expected return and standard…

A: State of EconomyProbability (A)Estimated return…

Q: Expected Return, Variance, Std. Deviation and Cofficient of Variation: Magee Inc.'s manager believes…

A: The standard deviation of the stock is the measure of the deviation of the stock's return from the…

Q: There are three possible states of economy-Boom, Growth or Recession and the returns on Ihser and…

A: When investor invest his money, he assumes to earn something on his investment for the period of…

Q: Suppose there are two independent economic factors, M₁ and M₂. The risk-free rate is 4%, and all…

A: The expected return-beta relationship in the Capital Asset Pricing Model (CAPM) is a fundamental…

Q: what is the different in returns between the Three-Factor model and the single factor model expected…

A: First let us determine the formula to compute the expected return under each model.

Q: Suppose that there are two independent economic factors, F₁ and F2. The risk-free rate is 10%, and…

A: The multi-factor model, commonly referred to as Arbitrage Pricing Theory (APT) or the Capital Asset…

Q: A financial manager believes that her firm will earn a 15% return next year.  This firm has a beta…

A: The expected return is the statistical measure of return, which is the sum of all possible rates of…

Q: Using the graph, answer the following standard deviation questions: 1. As the standard deviation for…

A: Hi, thanks for your question. “You have posted multiple sub-parts in this question. As per our…

Q: Required: What is the expected return-beta relationship in this economy? (Do not round Intermediate…

A: The expected return-beta relationship describes how the expected return of an investment depends on…

Q: When modeling the expected return of an income producing property, why should it be defined, for…

A: Step 1: Understand the concepts of NOI growth and vacancy rate.NOI (Net Operating Income) Growth:…

Q: Saveu Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%,…

A: Risk - free rate refers to the rate of return of an investment which is devoid of any risk of…

Q: Consider the following returns and states of the economy for TZ.Com.: Economy Probability Return…

A: The SD of the returns of a company refers to the spread of the returns around the average returns of…

Q: The return on the Agnes Corporation in the state of recession is estimated to be -23% and the return…

A: Covariance is a statistical concept that gauges the degree of co-movement between two variables…

Q: A company has a beta of 0.25. If the market return is expected to be 8 percent and the risk-free…

A: Solution: Required rate of return = Rf + Beta (Rm - Rf) Company's required rate of return is the…

Q: I asked this question before, and got an answer, but I have a question about the response that was…

A: The formula that you shared from the textbook is used for time-value-of-money calculations. Such a…

Q: sing the single factor model for firm with a Beta of 1 and when the standard deviationof the market…

A: Beta coefficient is a measure of an investment's systematic risk while the standard deviation is a…

Q: . You have collected the following NH-NL indicator data: If you are an technician following a…

A: NH-NL indicator shows the difference between the number of stocks touching new high [ 52-week high…

Q: BFC is an agribusiness with a highly variable cash flow, but where the risks tend to be related to…

A: Risk and return  are the two important factors of an investment. There is a positive relation…

Q: How would I do the same calculation if Beta is 1.2? That would be 1-1.2= -0.2 invested in the money…

A: Beta, in fact, provides the risk profile of an asset.

Risk Management Techniques

Risk management is the procedure of recognizing, analyzing, monitoring, and preventing the risks and threatening factors of investments and business. Risks can arise from various factors including internal controls, market changes, natural disasters, and failure in productions. Risk management techniques enable entities to control and minimize the risks as well as the threatening factors of the business and it also helps to improve the business.