Financial Management
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1. Why is it important to focus on total returns when measuring an investment's performance?
7. Stock A has a beta of 1.5, and stock B has a beta of 1.0. Determine whether each of the statements below is true or false.
a. Stock A must have a higher standard deviation than Stock B.
b. Stock A has a higher expected return than Stock B.
c. The expected return on Stock A is 50 percent higher than the expected return on B.
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This solution is comprised of a detailed explanation to answer why is it important to focus on total returns when measuring an investment's performance and determine whether each of the statements below is true or false.
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1. Why is it important to focus on total returns when measuring an investment's performance?
It is important to focus on total returns when measuring an investment's performance because the investor required to measure and compare the performance of their investments as to whether they have achieved the minimum return required from their investments or not.
The return required by the investor is the minimum return required by investors to compensate them for assuming risk. In the financial markets, there are many financial products with different level of risks. If the investors are risk-averse, they might choose to invest their money in risk-free assets such as treasury bills or treasury bonds where they will get the ...
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