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.
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

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?

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.
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps

Recommended textbooks for you

Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning

Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning

Microeconomics: Principles & Policy
Economics
ISBN:
9781337794992
Author:
William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:
Cengage Learning

Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning

Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning

Microeconomics: Principles & Policy
Economics
ISBN:
9781337794992
Author:
William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:
Cengage Learning

Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning

Macroeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506756
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning

Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning