Two investments generated the following annual returns (refer to image): a. What is the average annual return on each investment? b. What is the standard deviation of the return on investments X and Y? c. Based on the standard deviation, which investment was riskier?

Q: 3. Consider the following information for two assets that are perfectly negatively correlated:…

A: The expected returns and standard deviation of returns of two assets have been provided. The minimum…

Q: Does the accounting (book) rate of return (ARR) method provide a valid (or, meaningful) measureof…

A:

Q: What is the relationship of a portfolio standard deviation to the weighted average standard…

A: The standard deviation measures volatility of an investment or the risk of an investment. The…

Q: When using present worth to evaluate the attractiveness of a single investment alternative, what…

A: To calculate the attractiveness of investment there is need to calculate the present worth is…

Q: The expected return for an individual asset is the sum of expected returns in each state of the…

A: Expected rate of return is the most likely and probable and average rate of return that can be…

Q: What is the formula to find an expected in returns in CAPM

A: In this question, we are required to determine the formula for expected return in Capital Asset…

Q: Use the following information to answer the questions.       State of   Economy Probability of State…

A: Given : State of Economy Probability Return on Asset D Return on Asset E Return on Asset F Boom…

Q: What is the expected return on a two asset portfolio and what are its variance and standard…

A: Two Asset portfolio: The portfolio that has 2 assets is called as two asset portfolio.

Q: A measure of how the returns of two risky assets move in relation to each other is the:

A: By calculating covariance we can identify in what direction the returns move for two securities.

Q: The expected value, standard deviation of returns, and coefficient below.) Asset A Possible Outcomes…

A: Expected return-The expected return is calculated by multiplying the probability of each possible…

Q: This method evaluates the return of an investment by dividing the annual average income by the…

A: By dividing the annual average income by the average investment, return on investment is calculated.…

Q: Year Stock A Stock B 2010 - 6% 25% 2011 17% 5% 2012 6% 4% 2013 - 9% - 2% 2014 4% - 4% 2015 13% 25%

A: A stock is a security that describes the percentage of ownership of a particular company held by an…

Q: The payback method measures: The profitability of an investment. The net cash inflow from an…

A: Pay back period is most popular method of capital budgeting decisions and is quite simple to use and…

Q: The desired rate of return on an investment should reflect the degree of risk involved. A.   True…

A: Riskier investments may give higher returns to the investors as they provide favorable ratio of risk…

Q: The Capital Asset Pricing Model (CAPM) asserts that an asset’s expected return is equal to the…

A: Based on CAPM, Expected return on security = Risk free rate + Beta * Market risk premium

Q: 15. Standard deviation can be used to measure a) Risk of an investment, b) Return of an investment,…

A: The correct answer is: a) Risk of an investment.

Q: 3. Compute Project Y's accounting rate of return. Project Y Numerator: Annual income Accounting Rate…

A: ACCOUNTING RATE OF RETURNAccounting Rate of Return is one of the Important Capital Budgeting…

Q: Another name for the expected value of an investment would be: a. The mean value b. The risk-free…

A: The expected value (EV) is an anticipated value for investment at some point in the future. In…

Q: Discounting an investment’s cash flows using the internal rate of return will result in which of the…

A: Introduction: The internal rate of return (IRR) is a research and consulting metric used to assess…

Q: Which of the following statements is correct?   Select one: a.   Assuming a correlation…

A: The combination of stock will reduce the overall risk of the portfolio but it it depends on the…

Q: The VIX measures Select one: a.Realized volatility B. Current volatility C. Historical volatility D.…

A: The VIX stands for volatility index. Volatility index was the first benchmark which was created by…

Q: Demonstrate the link between net present value and internal rate of return and how they may be used…

A: According to the question, the relationship between net present value and internal rate of return

Q: Match each term with the best definition or descriptor. NPV is __________ ( a unitless ratio, a…

A: Solution:- Net Present Value (NPV) means the net present value of cash inflows after the deduction…

Q: Expected return and standard deviation a.  What is the expected return of asset​ b?

A: The expected return is the return that an investor expects on its investment under various…

Q: Assets are priced such that _____________________ increase with the riskiness of future payoffs. A)…

A: Solution:- Payoff means the amount which is receivable on maturity.

Q: The contribution of an individual asset to the riskiness of a fully diversified portfolio depends…

A: A portfolio is made up of two or more than two stocks. A well-diversified portfolio is that…

Q: When the forward rate is equal to the expected future spot rate, the forward rate is said to be…

A: Forward contract are settled in the future times and related to spot rate and they derive value from…

Q: Explain what is meant by Accounting Rate of Return (ARR) and Net Present Value (NPV) in the context…

A: Solution:- Accounting Rate of Return (ARR):- It measures the expected profitability from any capital…

Q: A particular investment's rate of return is referred to as a "return on investment.

A: In response to the question The phrase "financial market" refers to items that are often seen in the…

Q: Q3. Explain the following A) Measure of historical returns (Single Asset) B) Measure of historical…

A: Return= Total gain/loss on an asset over a given period of time.

Q: Please answer all parts (a-d) with explanations thx.

A: Expected return (ER) refers to the average returns expected to be received on a particular share or…

Q: a. What is the expected return of each asset? b. What is the variance and the standard deviation of…

A:

Q: The additional compensation that investors require to take on higher risk investments is the a.…

A: The risk associated with an investment refers to the probability of loss that an investor bears when…

Q: Which one of the following is defined as the average compound return earned per year over a…

A: In every business, amounts are being invested for the purpose of calculating and earnings returns.…

Q: The most accurate way to analyze the profitability of an investment is to compute the payback…

A: Payback period is the period for time taken of project to repay the initial investment. Payback…

Q: The probability distributions of expected returns for the assets are shown in the following table:…

A: We need to compute return and standard deviation for asset A.

Q: Over the past 3 years an investment returned 0.16, -0.11, and 0.08. What is the variance of returns?

A: In the given case, the investment returned of the past 3 years are given . So, number of years is 3.…

Q: Both simple and compound interest represent the rate of return (ROR) on investments Select one: True…

A: Formula for simple interest = Principal x Interest x Time Formula for compound interest = Principal…

Q: What role does the correlation what role does the correlation of two assets play in computation of…

A: The answer and the explanation can be seen below:

Q: Assume there are only three risky assets in which to invest, A, B and C. The expected return and…

A: Here, SecurityReturnStandard DeviationStock A8%0.04Stock B10%0.05Stock C7%0.02

Q: Identify two disadvantages of using the payback period for comparing investments.

A: