Question

**You found year over year returns of stock are highly
volatile. Does this mean you should necessarily consider this stock
a risky investment? Why/Why not?**

Answer #1

It absolutely depends on the risk appetite of the person who is investing. For example if the risk taking ability of the person is high then he might not consider it as a risky investment and might enjoy the high risk return reward policy.

Whereas if the person's risk taking ability is less then he might not be comfortable with too much volatility of the stock price with respect to a much stable stock which can make a less upward / downward movement and hence will consider it as a risky investment.

You invest in a stock over a 5-year period. The returns in each
of the 5 years are: 10%, 1%, -12%, 4%, and 20%. For all questions,
answer should be given in terms of %, and rounded to one decimal
place.
1) What is the 5-year Holding Period Return (HPR) of your stock
investment? (in %, 1 decimal place)
2) What is the compound annual growth rate of the investment
over the 5-year period? (in %, 1 decimal place)

Observe the following returns over time:
Year:
Stock A:
Market:
2014
18%
14%
2015
6%
8%
2016
23%
12%
Assume that the risk-free rate is 6% and the market risk premium
is 5%.
a) What are the expected rates of
return on Stock A and the market?
b) What is the standard deviation
on Stock A and the market?
c) What is the Beta for Stock X
given a correlation to the market of 0.8117? Is Stock A more or
less...

Beta Questions for Starbucks: Beta is 0.7611231
1. Is your company's beta positive? What does it mean for
investors in that stock? 2) Is your company's beta above 1 in
absolute value? What does it mean for the stock returns? 3) Would
you consider adding the stock to your investment portfolio based on
the beta you found? Why or why not?

Do you believe that stock prices are too volatile? Be sure to
explain what you mean when you say “volatility” and “too much.”

You have observed the following returns over time: Year: Stock
X: Market: 2014 18% 14% 2015 6% 8% 2016 23% 12% Assume that the
risk-free rate is 6% and the market risk premium is 5%. a) What are
the expected rates of return on Stock X and the market? b) What is
the standard deviation on Stock X and the market? c) What is the
Beta for Stock X given a correlation to the market of 0.8117? Is
Stock X...

Does Walmart’s higher stock turn rate necessarily mean that is more
profitable than Target? why or why not?

PLEASE SHOW WORK
The following annual returns for Stock E are projected
over the next year for three possible states of the economy. What
is the stock’s standard deviation, variance, and mean
of returns?E(R) = 8.5% ; σ = 22.70%; mean = $7.50;
standard deviation = $2.50
State
Prob
E(R)
Boom
10%
40%
Normal
60%
20%
Recession
30%
- 25%

Consider the following statistics of
the returns of Stock A, Stock B and the market (m):
sA =
0.20 corrA,m = 0.4
sB =
0.30 corrB,m = 0.7
sm = 0.15
E(rm) = 0.10
Suppose further that the risk-free
rate is 5%.
(a) According to the Capital Asset Pricing Model, what
should be the expected return of Stock A and of
Stock B? [Hint: This is an open-book
exam.]
(b) Suppose that the correlation between the...

You run a regression of X’ Company stock's returns against the
market returns over a five-year time period (using monthly data)
and come up with the following output: Intercept = .20%, Slope =
1.20 Your stock had an annualized standard deviation of returns of
40% whereas the market standard deviation was only 20%. The
annualized risk-free rate, on average, over the last five years has
been 6% and it is currently at 7%. The risk premium = 8.5%. The
annualized...

You are investigating the stability of stock index returns over
a multi-decade horizon. You collect the following information about
monthly index returns:
Time
N. observations
Mean return (%)
St.Dev (%)
1990-1999
120
-0.07
3.61
2000-2009
120
0.08
3.4
Assuming equal variances between periods, calculate the
statistic for differences between means, to test the hypothesis
that the means are equal. Bonus thinking question: can you reject
the equal means hypothesis? Enter answer accurate to 3 decimal
places. PLEASE SHOW STEPS AND...

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