Answer:
Risk and Return
1. Joe is an average investor. His financial advisor gave him options of investing in stock A, with a σ of 12%, and stock B, with a σ of 9%. Both stocks have the same expected return of 16%. Joe can pick only one stock and decides to invest in stock B.
Good Financial Decision?
Yes
No
2. Marcie works for an educational technology firm that recently launched its employee stock option plan (ESOP). Marcie allocated all her investments in the ESOP.
Good Financial Decision?
Yes
No
3. rin wants to invest in a hedge fund that has had a very strong performance track record. The hedge fund has given its investors a return of over 60% for the past five years. Although Erin is tempted to put her money in the fund, she decides to conduct due diligence on the hedge fund’s assets, because she is aware that past performance is no guarantee of future results.
Good Financial Decision?
Yes
No
Explanation:
1. Joe's decision to invest in stock B is a good financial decision. Since both investments have the same returns, the decision on which investment to take shifts to the standard deviation of the returns, which specifies the variability of the returns. Invariably, the investment with less standard deviation should win the vote. Therefore, Joe's decision is a good financial decision because investment in B has a standard deviation of 9% unlike A's 12%.
2. Putting all eggs in one market as Marcie had done by allocating all her investments in the ESOP is not a good financial decision, theoretically. It is always best to spread the risks, though higher-yielding investments (returns) bear higher risks.
3. The decision of Erin to conduct due diligence on the hedge fund's assets, despite its past performance is a good financial decision. Due diligence reveals some behind-the-scene information that are instrumental in making sound business decisions. Who are the present managers of the fund? What systems are in place in the entity to guarantee similar future performance, all things being equal? What market's sentiments and information are available for consideration? These questions, and many others can be answered through a due diligence. Surely, "past performance is no guarantee of future results."
Answer:
In a multidimensional organization, the firm uses different criteria on several levels, reported at the same time, to track its performance.
Explanation:
Managers in a multidimensional organization have common goals. The management process prioritizes decision making
Answer:
$ 10
Explanation:
Given:
For Bedford lamp
Sales price = $ 26
Variable cost = $ 16
Machine hours required per unit = 1
Now,
the contribution margin per unit = Sales price - Variable cost
= $ 26 - $ 16
= $ 10
therefore,
the contribution margin per machine hour is calculated as:
= contribution margin / machine hours
or
= $ 10 / 1
or
= $ 10
hence,
the contribution margin per machine hour for the bedford lamp is $ 10
Answer:
D It is D because it can help you do all these things and you may even progress from it and learn your mistakes
Answer:
c. interest rates on bonds of different maturities move together over time.
Explanation:
"When riding the yield curve, an investor will purchase bonds with maturities longer than the investment horizon and sell them at the end of the investment horizon. This strategy is used in order to profit from the normal upward slope in the yield curve caused by liquidity preferences and from the greater price fluctuations that occur at longer maturities."
Reference: Chen, James. “Riding the Yield Curve.” Investopedia, Investopedia, 25 July 2019
