Donna is looking into investing a portion of her recent bonus into the stock market. While researching different companies, she discovers the following standard deviations of one year of daily stock closing prices. Handy Prosthetics: Standard deviation of stock prices = $1.12 El Lobo Malo Incorporated: Standard deviation of stock prices = = $9.63 Based on the data and assuming these trends continue, which company would give Donna a stable long-term investment? ○ Handy Prosthetics; the smaller standard deviation indicates that Handy Prosthetics has a greater mean closing price than El Lobo Malo Incorporated. ○ Handy Prosthetics; the smaller standard deviation indicates that Handy Prosthetics has less variability in its closing prices than El Lobo Malo Incorporated. El Lobo Malo Incorporated; the larger standard deviation indicates that El Lobo Malo Incorporated has less variability in its closing prices than Handy Prosthetics. El Lobo Malo Incorporated; the larger standard deviation indicates that El Lobo Malo Incorporated has a greater mean closing price than Handy Prosthetics.

Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
Problem 5.2IP
Question
Donna is looking into investing a portion of her recent bonus into the stock market. While researching different companies, she discovers the following standard
deviations of one year of daily stock closing prices.
Handy Prosthetics:
Standard deviation of stock prices = $1.12
El Lobo Malo Incorporated: Standard deviation of stock prices = = $9.63
Based on the data and assuming these trends continue, which company would give Donna a stable long-term investment?
Transcribed Image Text:Donna is looking into investing a portion of her recent bonus into the stock market. While researching different companies, she discovers the following standard deviations of one year of daily stock closing prices. Handy Prosthetics: Standard deviation of stock prices = $1.12 El Lobo Malo Incorporated: Standard deviation of stock prices = = $9.63 Based on the data and assuming these trends continue, which company would give Donna a stable long-term investment?
○ Handy Prosthetics; the smaller standard deviation indicates that Handy Prosthetics has a greater mean closing price than El Lobo Malo Incorporated.
○ Handy Prosthetics; the smaller standard deviation indicates that Handy Prosthetics has less variability in its closing prices than El Lobo Malo Incorporated.
El Lobo Malo Incorporated; the larger standard deviation indicates that El Lobo Malo Incorporated has less variability in its closing prices than Handy Prosthetics.
El Lobo Malo Incorporated; the larger standard deviation indicates that El Lobo Malo Incorporated has a greater mean closing price than Handy Prosthetics.
Transcribed Image Text:○ Handy Prosthetics; the smaller standard deviation indicates that Handy Prosthetics has a greater mean closing price than El Lobo Malo Incorporated. ○ Handy Prosthetics; the smaller standard deviation indicates that Handy Prosthetics has less variability in its closing prices than El Lobo Malo Incorporated. El Lobo Malo Incorporated; the larger standard deviation indicates that El Lobo Malo Incorporated has less variability in its closing prices than Handy Prosthetics. El Lobo Malo Incorporated; the larger standard deviation indicates that El Lobo Malo Incorporated has a greater mean closing price than Handy Prosthetics.
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