Rate of return Douglas Keel, a financial analyst for Orange Industries, wishes to estimate the rate of return for two similar-risk investments, X and Y. Douglas's research indicates that the immediate past returns will serve as reasonable estimates of future returns. A year earlier, investment X had a market value of $12,000, and investment Y had a market value of $67,000. During the year, investment X generated cash flow of $900 and investment Y generated cash flow of $7,755. The current market values of investments X and Y are $12,809 and $67,000, respectively. a. Calculate the expected rate of return on investments X and Y using the most recent year's data. b. Assuming that the two investments are equally risky, which one should Douglas recommend? Why? OOO a. The expected rate of return on investment X is% (Round to two decimal places.)
Rate of return Douglas Keel, a financial analyst for Orange Industries, wishes to estimate the rate of return for two similar-risk investments, X and Y. Douglas's research indicates that the immediate past returns will serve as reasonable estimates of future returns. A year earlier, investment X had a market value of $12,000, and investment Y had a market value of $67,000. During the year, investment X generated cash flow of $900 and investment Y generated cash flow of $7,755. The current market values of investments X and Y are $12,809 and $67,000, respectively. a. Calculate the expected rate of return on investments X and Y using the most recent year's data. b. Assuming that the two investments are equally risky, which one should Douglas recommend? Why? OOO a. The expected rate of return on investment X is% (Round to two decimal places.)
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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Hi there help me with this its kinda easy for you please cross check once after doing ( by eyes only)
Transcribed Image Text:Rate of return Douglas Keel, a financial analyst for Orange Industries, wishes to estimate the rate of return for
two similar-risk investments, X and Y. Douglas's research indicates that the immediate past returns will serve as
reasonable estimates of future returns. A year earlier, investment X had a market value of $12,000, and investment Y
had a market value of $67,000. During the year, investment X generated cash flow of $900 and investment Y
generated cash flow of $7,755. The current market values of investments X and Y are $12,809 and $67,000,
respectively.
a. Calculate the expected rate of return on investments X and Y using the most recent year's data.
b. Assuming that the two investments are equally risky, which one should Douglas recommend? Why?
a. The expected rate of return on investment X is% (Round to two decimal places)
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