a. What is meant by the investor’s required rate of return ? b. How do we measure the riskiness of an asset? c. How should the proposed measurement of risk be interpreted?

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Answer 1

Textbook Question

Chapter 6, Problem 1RQ

a. What is meant by the investor’s required rate of return?
b. How do we measure the riskiness of an asset?
c. How should the proposed measurement of risk be interpreted?

1.

Expert Solution

Summary Introduction

To discuss: The meaning of investor’s required rate of return.

Explanation of Solution

The meaning of investor’s required rate of return is as follows:

The required rate of return is the return of an investor which is important to invite an investor to buy or hold a security.

2.

Expert Solution

Summary Introduction

To discuss: The ways to measure the riskiness of an asset.

Explanation of Solution

The ways to measure the riskiness of an asset is as follows:

Risk is the potential fluctuation in returns on an investment. Therefore, the higher the vulnerability or uncertainty with regards to the specific result, the higher is the risk. The risk might be estimated as far as the standard deviation of rate of return or by the variances of rates of return, which are just the squared values of the standard deviation.

3.

Expert Solution

Summary Introduction

To discuss: The ways proposed measurement of risk is interpreted.

Explanation of Solution

The ways proposed measurement of risk is interpreted is as follows:

Higher standard deviation of returns demonstrates higher risk related with the investment. The future cash flows have a higher potential variation. Though, regardless of whether the standard deviation is huge comparative with the returns must be inspected as for other investment opportunities. On the other hand, the probability analysis is an important methodology to deal with catch higher comprehension of the vastness of a standard deviation figure.

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Question 3Footfall Manufacturing Ltd. reports the following financialinformation at the end of the current year:Net Sales $100,000Debtor’s turnover ratio (based onnet sales)2Inventory turnover ratio 1.25Fixed assets turnover ratio 0.8Debt to assets ratio 0.6Net profit margin 5%Gross profit margin 25%Return on investment 2%Use the given information to fill out the templates for incomestatement and balance sheet given below:Income Statement of Footfall Manufacturing Ltd. for the year endingDecember 31, 20XX(in $)Sales 100,000Cost of goodssoldGross profitOther expensesEarnings beforetaxTax @50%Earnings aftertaxBalance Sheet of Footfall Manufacturing Ltd. as at December 31, 20XX(in $)Liabilities Amount Assets AmountEquity Net fixed assetsLong termdebt50,000 InventoryShort termdebtDebtorsCashTOTAL TOTAL

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Answer 2

Textbook Question

Chapter 6, Problem 1RQ

a. What is meant by the investor’s required rate of return?
b. How do we measure the riskiness of an asset?
c. How should the proposed measurement of risk be interpreted?

1.

Expert Solution

Summary Introduction

To discuss: The meaning of investor’s required rate of return.

Explanation of Solution

The meaning of investor’s required rate of return is as follows:

The required rate of return is the return of an investor which is important to invite an investor to buy or hold a security.

2.

Expert Solution

Summary Introduction

To discuss: The ways to measure the riskiness of an asset.

Explanation of Solution

The ways to measure the riskiness of an asset is as follows:

Risk is the potential fluctuation in returns on an investment. Therefore, the higher the vulnerability or uncertainty with regards to the specific result, the higher is the risk. The risk might be estimated as far as the standard deviation of rate of return or by the variances of rates of return, which are just the squared values of the standard deviation.

3.

Expert Solution

Summary Introduction

To discuss: The ways proposed measurement of risk is interpreted.

Explanation of Solution

The ways proposed measurement of risk is interpreted is as follows:

Higher standard deviation of returns demonstrates higher risk related with the investment. The future cash flows have a higher potential variation. Though, regardless of whether the standard deviation is huge comparative with the returns must be inspected as for other investment opportunities. On the other hand, the probability analysis is an important methodology to deal with catch higher comprehension of the vastness of a standard deviation figure.

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Answer 3

Textbook Question

Chapter 6, Problem 1RQ

a. What is meant by the investor’s required rate of return?
b. How do we measure the riskiness of an asset?
c. How should the proposed measurement of risk be interpreted?

1.

Expert Solution

Summary Introduction

To discuss: The meaning of investor’s required rate of return.

Explanation of Solution

The meaning of investor’s required rate of return is as follows:

The required rate of return is the return of an investor which is important to invite an investor to buy or hold a security.

2.

Expert Solution

Summary Introduction

To discuss: The ways to measure the riskiness of an asset.

Explanation of Solution

The ways to measure the riskiness of an asset is as follows:

Risk is the potential fluctuation in returns on an investment. Therefore, the higher the vulnerability or uncertainty with regards to the specific result, the higher is the risk. The risk might be estimated as far as the standard deviation of rate of return or by the variances of rates of return, which are just the squared values of the standard deviation.

3.

Expert Solution

Summary Introduction

To discuss: The ways proposed measurement of risk is interpreted.

Explanation of Solution

The ways proposed measurement of risk is interpreted is as follows:

Higher standard deviation of returns demonstrates higher risk related with the investment. The future cash flows have a higher potential variation. Though, regardless of whether the standard deviation is huge comparative with the returns must be inspected as for other investment opportunities. On the other hand, the probability analysis is an important methodology to deal with catch higher comprehension of the vastness of a standard deviation figure.

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Answer 4

Textbook Question

Chapter 6, Problem 1RQ

a. What is meant by the investor’s required rate of return?
b. How do we measure the riskiness of an asset?
c. How should the proposed measurement of risk be interpreted?

1.

Expert Solution

Summary Introduction

To discuss: The meaning of investor’s required rate of return.

Explanation of Solution

The meaning of investor’s required rate of return is as follows:

The required rate of return is the return of an investor which is important to invite an investor to buy or hold a security.

2.

Expert Solution

Summary Introduction

To discuss: The ways to measure the riskiness of an asset.

Explanation of Solution

The ways to measure the riskiness of an asset is as follows:

Risk is the potential fluctuation in returns on an investment. Therefore, the higher the vulnerability or uncertainty with regards to the specific result, the higher is the risk. The risk might be estimated as far as the standard deviation of rate of return or by the variances of rates of return, which are just the squared values of the standard deviation.

3.

Expert Solution

Summary Introduction

To discuss: The ways proposed measurement of risk is interpreted.

Explanation of Solution

The ways proposed measurement of risk is interpreted is as follows:

Higher standard deviation of returns demonstrates higher risk related with the investment. The future cash flows have a higher potential variation. Though, regardless of whether the standard deviation is huge comparative with the returns must be inspected as for other investment opportunities. On the other hand, the probability analysis is an important methodology to deal with catch higher comprehension of the vastness of a standard deviation figure.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

1.

Expert Solution

Summary Introduction

To discuss: The meaning of investor’s required rate of return.

Explanation of Solution

The meaning of investor’s required rate of return is as follows:

The required rate of return is the return of an investor which is important to invite an investor to buy or hold a security.

2.

Expert Solution

Summary Introduction

To discuss: The ways to measure the riskiness of an asset.

Explanation of Solution

The ways to measure the riskiness of an asset is as follows:

Risk is the potential fluctuation in returns on an investment. Therefore, the higher the vulnerability or uncertainty with regards to the specific result, the higher is the risk. The risk might be estimated as far as the standard deviation of rate of return or by the variances of rates of return, which are just the squared values of the standard deviation.

3.

Expert Solution

Summary Introduction

To discuss: The ways proposed measurement of risk is interpreted.

Explanation of Solution

The ways proposed measurement of risk is interpreted is as follows:

Higher standard deviation of returns demonstrates higher risk related with the investment. The future cash flows have a higher potential variation. Though, regardless of whether the standard deviation is huge comparative with the returns must be inspected as for other investment opportunities. On the other hand, the probability analysis is an important methodology to deal with catch higher comprehension of the vastness of a standard deviation figure.

Answer 8

1.

Expert Solution

Summary Introduction

To discuss: The meaning of investor’s required rate of return.

Explanation of Solution

The meaning of investor’s required rate of return is as follows:

The required rate of return is the return of an investor which is important to invite an investor to buy or hold a security.

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

Summary Introduction

To discuss: The meaning of investor’s required rate of return.

Answer 13

Explanation of Solution

The meaning of investor’s required rate of return is as follows:

The required rate of return is the return of an investor which is important to invite an investor to buy or hold a security.

Answer 14

2.

Expert Solution

Summary Introduction

To discuss: The ways to measure the riskiness of an asset.

Explanation of Solution

The ways to measure the riskiness of an asset is as follows:

Risk is the potential fluctuation in returns on an investment. Therefore, the higher the vulnerability or uncertainty with regards to the specific result, the higher is the risk. The risk might be estimated as far as the standard deviation of rate of return or by the variances of rates of return, which are just the squared values of the standard deviation.

Answer 15

2.

Expert Solution

Answer 16

2.

Expert Solution

Answer 17

Expert Solution

Answer 18

Summary Introduction

To discuss: The ways to measure the riskiness of an asset.

Answer 19

Explanation of Solution

The ways to measure the riskiness of an asset is as follows:

Risk is the potential fluctuation in returns on an investment. Therefore, the higher the vulnerability or uncertainty with regards to the specific result, the higher is the risk. The risk might be estimated as far as the standard deviation of rate of return or by the variances of rates of return, which are just the squared values of the standard deviation.

Answer 20

3.

Expert Solution

Summary Introduction

To discuss: The ways proposed measurement of risk is interpreted.

Explanation of Solution

The ways proposed measurement of risk is interpreted is as follows:

Higher standard deviation of returns demonstrates higher risk related with the investment. The future cash flows have a higher potential variation. Though, regardless of whether the standard deviation is huge comparative with the returns must be inspected as for other investment opportunities. On the other hand, the probability analysis is an important methodology to deal with catch higher comprehension of the vastness of a standard deviation figure.

Answer 21

3.

Expert Solution

Answer 22

3.

Expert Solution

Answer 23

Expert Solution

Answer 24

Summary Introduction

To discuss: The ways proposed measurement of risk is interpreted.

Answer 25

Explanation of Solution

The ways proposed measurement of risk is interpreted is as follows:

Higher standard deviation of returns demonstrates higher risk related with the investment. The future cash flows have a higher potential variation. Though, regardless of whether the standard deviation is huge comparative with the returns must be inspected as for other investment opportunities. On the other hand, the probability analysis is an important methodology to deal with catch higher comprehension of the vastness of a standard deviation figure.

Answer 26

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a. What is meant by the investor’s required rate of return ? b. How do we measure the riskiness of an asset? c. How should the proposed measurement of risk be interpreted?

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