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# The coefficient of variation is a better measure of risk tha

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5. The coefficient of variation is a better measure of risk than the standard deviation if the expected returns of the securities being compared differ significantly.

a. True

b. False

6. In portfolio analysis, we often use ex post (historical) returns and standard deviations, despite the fact that we are interested in ex ante (future) data.

a. True

b. False

7. Typically, debentures have higher interest rates than mortgage bonds primarily because the mortgage bonds are backed by assets while debentures are unsecured.

a. True

b. False

8. If two firms have the same current dividend and the same expected growth rate, their stocks must sell at the same current price or else the market will not be in equilibrium.

a. True

b. False

#### Solution Preview

5. The coefficient of variation is a better measure of risk than the standard deviation if the expected returns of the securities being compared differ significantly.

a. True XX correct, the standard ...

#### Solution Summary

The coefficient of variation is a better measure of risk than the standard deviation if the expected returns of the securities being compared differ significantly.

a. True

b. False

6. In portfolio analysis, we often use ex post (historical) returns and standard deviations, despite the fact that we are interested in ex ante (future) data.

a. True

b. False

7. Typically, debentures have higher interest rates than mortgage bonds primarily because the mortgage bonds are backed by assets while debentures are unsecured.

a. True

b. False

8. If two firms have the same current dividend and the same expected growth rate, their stocks must sell at the same current price or else the market will not be in equilibrium.

a. True

b. False

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## Critically evaluate: Historic cost or alternative measurement base

Historic cost should be replaced by an alternative measurement base in order to make financial statement more useful.
Critically discuss this statement, concluding with whether or not you agree with it.

Consider the following:

Critically discuss the role and relevance of financial accounting information to the principal stakeholders in the business.
Appraise the limitation of financial accounting as a system of reporting business performance
Communicate financial information and concept.
Some description and explanation is needed but you need to develop arguments and discussion.
You are expected to take a critical perspective, for example recognize the limitations of certain measurement bases.

Referred to: Information for Better Markets: Measurement in Financial Reporting (Institute of Chartered Accountants in England and Wales) icaew.com/bettermarkets

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