Question 1

Exhibit 1A.1&#10;$$\begin{array} { c c } &#10;\text { Probability } & \text { Rate of Return } \&#10;\hline .15 & - .10 \&#10;.15 & - .20 \&#10;.35 & .00 \&#10;.25 & .15 \&#10;.10 & .15&#10;\end{array}$$&#10;&#10;-Refer to Exhibit 1A.1.The standard deviation of your expected return from this investment is&#10;A) 0.001&#10;B) 0.004&#10;C) 0.124&#10;D) 1.240&#10;E) None of the above

Accepted Answer

?² $$\begin{array} { l } = ( 0.15 ) ( - 0 .1 - 0 .0075 ) ^ { 2 } + ( 0.15 ) ( - 0 .2 - 0 .0075 ) ^ { 2 } + ( 0.35 ) ( 00 - 0 .0075 ) ^ { 2 } \ \quad + ( 0.25 ) ( 0.15 - 0.0075 ) ^ { 2 } + ( 0.10 ) ( 0.15 - 0.0075 ) ^ { 2 } \ = 0.015319 \end{array}$$ ? = 0.015319¹/² = 0.124

Question 2

Exhibit 1A.2&#10;Use the Information Below for the Following Problem(S)&#10;You have an opportunity to invest in project X with the following expected rates of return:&#10;$\begin{array} { c c } &#10;\text { Probability } & \text { Rate of Return } \&#10;\hline .25 & - .10 \&#10;.25 & .00 \&#10;.50 & .10&#10;\end{array}$&#10;&#10;-Refer to Exhibit 1A.2.The expected return for project X is&#10;A) 0.0 percent&#10;B) 0.5 percent&#10;C) 2.5 percent&#10;D) 5.0 percent&#10;E) 7.5 percent

Accepted Answer

2.5 percent&#10;

Question 3

An investment has a standard deviation of 12 percent and an expected return of 7 percent.What is the coefficient of variation for this investment?&#10;A) 1.714&#10;B) 1.372&#10;C) 0.714&#10;D) 0.583&#10;E) 0.500

Accepted Answer

1.714&#10;

Question 4

Exhibit 1A.1&#10;$$\begin{array} { c c } &#10;\text { Probability } & \text { Rate of Return } \&#10;\hline .15 & - .10 \&#10;.15 & - .20 \&#10;.35 & .00 \&#10;.25 & .15 \&#10;.10 & .15&#10;\end{array}$$&#10;&#10;-Refer to Exhibit 1A.1.The expected return from this investment is&#10;A) -0.0752&#10;B) -0.0040&#10;C) 0.00&#10;D) 0.0075&#10;E) 0.4545

Accepted Answer

E(R)= (-0.10)(0.15)+ (-0.20)(0.15)+ (0.00)(0.35)+ (0.15)(0.25)+ (0.15)(0.10)= 0.0075

Question 5

Exhibit 1A.1&#10;$$\begin{array} { c c } &#10;\text { Probability } & \text { Rate of Return } \&#10;\hline .15 & - .10 \&#10;.15 & - .20 \&#10;.35 & .00 \&#10;.25 & .15 \&#10;.10 & .15&#10;\end{array}$$&#10;&#10;-Refer to Exhibit 1A.1.The coefficient of variation of this investment is&#10;A) -0.06&#10;B) -0.65&#10;C) 6.60&#10;D) 16.53&#10;E) 165.10

Accepted Answer

The coefficient of variation (CV)equals 0.124/0.0075 = 16.53

Question 6

Exhibit 1A.2&#10;Use the Information Below for the Following Problem(S)&#10;You have an opportunity to invest in project X with the following expected rates of return:&#10;$\begin{array} { c c } &#10;\text { Probability } & \text { Rate of Return } \&#10;\hline .25 & - .10 \&#10;.25 & .00 \&#10;.50 & .10&#10;\end{array}$&#10;&#10;-Refer to Exhibit 1A.2.The standard deviation for project X is&#10;A) -1.581 percent&#10;B) 0.000 percent&#10;C) 1.581 percent&#10;D) 2.738 percent&#10;E) 5.000 percent

Accepted Answer

The answer of Exhibit 1A.2&#10;Use the Information Below for the...

Deck 26: Investment Return and Risk Analysis Questions