1) Consider two stocks A and B and their returns are assumed to be normally distributed. Over the past 10 years, both stocks have the same (arithmetic) average annual returns, but Stock A has a significantly higher volatility (measured by standard deviation of annual returns) than Stock B. Which of the following is TRUE? A) Stock A has a higher geometric average return than Stock B. B) Stock A has a lower geometric average return than Stock B. C) Stock A and B have the same geometric average return. D) There is no sufficient information to determine which stock has a higher or lower geometric average return.
1) Consider two stocks A and B and their returns are assumed to be
A) Stock A has a higher geometric average return than Stock B.
B) Stock A has a lower geometric average return than Stock B.
C) Stock A and B have the same geometric average return.
D) There is no sufficient information to determine which stock has a higher or lower geometric average return.
2) PL Lumber stock is expected to return 22 percent in a booming economy, 15 percent in a normal economy, and lose 2 percent in a recession. The probabilities of an economic boom, normal state, or recession are 15 percent, 80 percent, and 5 percent, respectively. What is the expected
12.80 percent 14.60 percent 15.20 percent 15.60 percent
3) You would like to invest $24,000 and have a portfolio expected return of 11.5 percent. You are considering two securities, A and B. Stock A has an expected return of 18.6 percent and B has an expected return of 8.4 percent. Approximately how much should you invest in Stock A if you invest the remaining balance in Stock B?
$7,294 $7,686 $8,152 $8,786
4) K's Bridal Shoppe has 4,000 shares of common stock outstanding at a price of $15 a share. It also has 500 shares of
46.43 percent 48.23 percent 49.06 percent 50.00 percent
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