Complete: a minimum of 1,000 words (total assignment) and three scholarly sources.
- How do you think risk should be measured? Explain your reasoning.
- Explain what is meant by “risk drives expected return”.
- For Asset A and for Asset B, compute the average annual return, variance, standard deviation, and coefficient of variation for the annual returns given below.
a. Asset A: 5%, 10%, 15%, 4%
b. Asset B: -6%, 20%, 2%, -5%, 10%
4. Compute the holding period returns for each security below:
Security
Price Today
Price One Year Ago
Dividends Received
Interest Received
RR
$20.05
$18.67
$0.50
WC
$33.42
$45.79
$1.10
AC
$1,015.38
$991.78
$100.00
5. Find the real return, nominal after-tax return, and real after-tax return for each of the following stocks:
Stock
Nominal Return
Inflation
Tax Rate
X
13.5%
5%
15%
Y
8.7%
4.7%
25%
Z
5.2%
2.5%
28%
6. In what ways does a proprietorship differ from a partnership? In what ways does a proprietorship differ from a corporation?
7. What information might a changing stock price give to managers?
8. What are agency costs? Give some examples. How might they be measured?
