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
Concept explainers
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
| Terrance invested $1,500 in a mutual fund on January 1, 2010. He has brought you all of the annual statements he has received from the fund company, and asked for your help in analyzing the results. The statement shows the following returns: | |||||||
| 2010 | 8% | 2013 | -7% | ||||
| 2011 | 2% | 2014 | 3% | ||||
| 2012 | -5% | 2015 | 22% |
Calculate Terrance' arithmetic mean return
Question 9 options:
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1.87% |
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2.5% |
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3.41% |
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3.83% |
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