Discuss risk factors in analyzing investments
Not what you're looking for?
At this point, you believe customers are now ready to begin risk analysis and understand the risk differences among various investments. The most basic fact you want to convey to them is risk and return?the greater the risk, the greater the expected return. From there, you want to explain how expected returns can be calculated given the level of risk and outlining which investments are more risky and which are less risky. Create a file for uploading to the Discussion Board which contains all of the following information.
First, graph and explain the risk profile for the following:
Risk Expected Return
0.10 0.07
0.14 0.10
0.20 0.15
0.30 0.25
Second, given the following two investment options, explain what an investor would choose and why:
Investment 1, an investment that is guaranteed a 6.5 percent return.
Investment 2, an investment that has a probability 0.25 of earning 5%, a 0.50 probability of earning 10%, and a 0.25 probability of earning 0%.
Third, explain which of the investments below are riskier and why:
Corporate stocks
Corporate bonds
Treasury bonds
Fourth, for the class of investors below, explain which investment vehicle they are likely to choose based on its risk profile (stock, corporate bond, and Treasury bond):
A retiree that is looking for a safe investment
A 28-year-old MBA graduate looking for high returns
A forty-something professional looking for good investment income
Purchase this Solution
Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
Recent Feedback
- "Your explanation to the answers were very helpful."
- "What does 1 and 0 means in the repair column?"
- "Went through all of the formulas, excellent work! This really helped me!"
- "try others as well please"
- "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."
Purchase this Solution
Free BrainMass Quizzes
Learning Lean
This quiz will help you understand the basic concepts of Lean.
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
Lean your Process
This quiz will help you understand the basic concepts of Lean.
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.