Q.1.2 You have been presented with the following information and asked to estimate the rate of return of two investments, which are considered to be of similar risk. Historical risks are a reasonable indicator of future returns. Value at 1 January 2023 Value at 31 December 2023 Cash flow Investment 1 Investment 2 90 000 240 000 96 000 260 000 6.800 40 000 Q.1.2.1 Calculate the expected return of each investment. Provide the formulas used. Q.1.2.2 Assuming the two investments have the same risk profile, which investment should you choose and why? (12) (3)
Q.1.2 You have been presented with the following information and asked to estimate the rate of return of two investments, which are considered to be of similar risk. Historical risks are a reasonable indicator of future returns. Value at 1 January 2023 Value at 31 December 2023 Cash flow Investment 1 Investment 2 90 000 240 000 96 000 260 000 6.800 40 000 Q.1.2.1 Calculate the expected return of each investment. Provide the formulas used. Q.1.2.2 Assuming the two investments have the same risk profile, which investment should you choose and why? (12) (3)
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
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Transcribed Image Text:Q.1.2
You have been presented with the following information and asked to estimate
the rate of return of two investments, which are considered to be of similar risk.
Historical risks are a reasonable indicator of future returns.
Value at 1 January 2023
Value at 31 December 2023
Cash flow
Investment 1
Investment 2
90 000
240 000
96 000
260 000
6.800
40 000
Q.1.2.1 Calculate the expected return of each investment.
Provide the formulas used.
Q.1.2.2 Assuming the two investments have the same risk profile, which
investment should you choose and why?
(12)
(3)
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