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Nana76 [90]
3 years ago
11

An investor will choose between Asset Q with an expected return of 6.5% and a standard deviation of 5.5%, Asset U with an expect

ed return of 8.8% and a standard deviation of 5.5%, and Asset B with an expected return of 8.8% and a standard deviation of 6.5%. Which one should the investor prefer?A. Asset B B. Cannot be determined C. Asset Q D. Asset U
Business
1 answer:
Alexxx [7]3 years ago
7 0

Answer:

The investor will prefer asset U. So the correct answer is option D

Explanation:

To choose between these stocks, we will calculate the coefficient of variation (CV) which is used to assess the risk per unit of expected return. As most people are risk averse, we assume that the investor is risk averse. We will calculate the CV for all three investments and the stock having lowest CV will be selected.

<u>Coefficient of Variation (CV)</u>

Coefficient of Variation =  standard deviation / expected return

<u />

Asset Q = 5.5% / 6.5% = 0.846

Asset U = 5.5% / 8.8% = 0.625

Asset B = 6.5% / 8.8% = 0.738

Thus, asset U has the lowest CV and the investor =, being a risk averse, will prefer asset U.

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Explanation

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11-Oct

Treasury                                                         292400

Cash                                                                                     292400

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Cash (1,450 × 49)                                             71,050

Treasury Stock (1,450 × 43)                                                 62,350

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Cash (5350 × 38)                                           203,300

Paid-in Capital from Sale of Treasury Stock   9,700

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<em>To record the sale of the remaining treasury shares  </em>      

4 0
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Answer:

a

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4 0
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He focused on the solving the cause of the problem by contacting the other publishers and accepting additional projects to compensate for the lost income.

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