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Risk and Return Tradeoff Memo

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Risk and Return Tradeoff Memo

a. Complete the Constructing and Managing a Portfolio simulation

b. Describe the risk-return tradeoff and the relationship between investment strategy and investment performance.

c. Based on your results from the simulation, prepare 1000 word
memo to Rainier Ekstrom, Casa Bonita's Chief Executive Officer (CEO), in which you analyze the risk and return tradeoffs associated with the organization's investment portfolio. Be sure to also address the following in your memo:

1) The decisions you made in the simulation.

2) A brief discussion of how the Sharpe Ratio helps in making investment decisions.

3) Recommendations for changes in the organization's investment strategy in order to improve its investment performance.

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Solution Summary

The solution discusses risk and return Tradeoff memos. The recommendations for changes in the organization's investment strategy in order to improve its investment performance is given.

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Risk in the field of finance according to Damodaran (2002) refers to the likelihood that we will receive a return on an investment that is different from the return we expected to make. Thus, risk includes not only the bad outcomes, i.e., returns that are lower than expected, but also good outcomes, i.e., returns that are higher than expected.
The concept of risk and return is very important for all financial decisions and all financial ...

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