(Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 5.3 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability 0.10 0.50 0.30 0.10 Return -4% 4% 7% 8% (Click on the icon in order to copy its contents into a spreadsheet.) a. The investment's expected return is %. (Round to two decimal places.) b. The investment's standard deviation is %. (Round to two decimal places.) c. Should Gautney invest in this security? (Select the best choice below.) ○ A. No. B. J. Gautney Enterprises should not invest in this investment because the return is lower than the Treasury bill and the level of risk higher than the Treasury bill. O B. Yes. B. J. Gautney Enterprises should invest in this investment because the return is lower than the Treasury bill and the level of risk higher than the Treasury bill.
(Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 5.3 percent. Calculate the investment's expected return and its standard deviation. Should Gautney invest in this security? Probability 0.10 0.50 0.30 0.10 Return -4% 4% 7% 8% (Click on the icon in order to copy its contents into a spreadsheet.) a. The investment's expected return is %. (Round to two decimal places.) b. The investment's standard deviation is %. (Round to two decimal places.) c. Should Gautney invest in this security? (Select the best choice below.) ○ A. No. B. J. Gautney Enterprises should not invest in this investment because the return is lower than the Treasury bill and the level of risk higher than the Treasury bill. O B. Yes. B. J. Gautney Enterprises should invest in this investment because the return is lower than the Treasury bill and the level of risk higher than the Treasury bill.
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
Related questions
Question
UNIT 7-6
Transcribed Image Text:(Related to Checkpoint 7.1) (Expected rate of return and risk) B. J. Gautney Enterprises is evaluating a security. One-year Treasury bills are currently paying 5.3 percent. Calculate the investment's expected return and its standard
deviation. Should Gautney invest in this security?
Probability
0.10
0.50
0.30
0.10
Return
-4%
4%
7%
8%
(Click on the icon in order to copy its contents into a spreadsheet.)
a. The investment's expected return is
%. (Round to two decimal places.)
b. The investment's standard deviation is %. (Round to two decimal places.)
c. Should Gautney invest in this security? (Select the best choice below.)
○ A. No. B. J. Gautney Enterprises should not invest in this investment because the return is lower than the Treasury bill and the level of risk higher than the Treasury bill.
O B. Yes. B. J. Gautney Enterprises should invest in this investment because the return is lower than the Treasury bill and the level of risk higher than the Treasury bill.
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