Risk and Return and the Coefficient of Variation
Not what you're looking for?
1. Risk & Return and the CAPM.
Based on the following information, calculate the required return based on the CAPM:
Risk Free Rate = 3.5%
Market Return =10%
Beta = 1.08
2. Risk and Return, Coefficient of Variation
Based on the following information, calculate the coefficient of variation and select the best investment based on the risk/reward relationship.
Std Dev. Exp. Return
Company A 10.4 15.2
Company B 14.6 22.9
3. Risk and Return, Coefficient of Variation
Based on the following information, calculate the coefficient of variation and select the best investment based on the risk/reward relationship.
Std Dev. Exp. Return
Company A 7.4 13.2
Company B 11.6 18.9
4. Portfolio Theory Risk.
What is portfolio theory and why is it important to investing behavior? 250 words
5. Sources of Risk.
Identify sources of risk and contrast them (include examples) and explain why investors should be concerned with them 250 words
Purchase this Solution
Solution Summary
Risk and return and the coefficient of variations are examined.
Solution Preview
Please refer to the attachment attached for properly formatted answer.
Thank you for using Brainmass. Have a good day!
practical financial management
1. Risk & Return and the CAPM.
Based on the following information, calculate the required return based on the CAPM:
Risk Free Rate = 3.5%
Market Return =10%
Beta = 1.08
ri = rRF + (rM - rRF)bi
where; ri is required return on the ith stock
rRF is risk-free rate of return
rM is required rate of return on a portfolio consisting of all stocks
bi is beta coefficient of the ith stock
(rM - rRF) = RPM
RPM is the risk premium on the market. It is the additional return over the risk-free rate required to compensate an average investor for assuming an average amount of risk.
ri = rRF + (RPM)bi
ri = 3.5% + (10%) (1.08)
ri = 14.3%
2. Risk and Return, Coefficient of Variation
Based on the following information, calculate the coefficient of variation and select the best investment based on the risk/reward relationship.
Std Dev. Exp. Return
Company A 10.4 15.2
Company B 14.6 22.9
Coefficient of variation (CV) =
Company A:
CV = 10.4 / 15.2 = 0.68421
Company B:
CV = 14.6 / 22.9 = 0.63755
Company A's CV is higher than company B's CV, so company A has the best investment.
3. Risk and Return, Coefficient of Variation
Based on the ...
Purchase this Solution
Free BrainMass Quizzes
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.