14. 16.) Jean Shepherd is examining two new products his company may begin selli
ID: 2634332 • Letter: 1
Question
14. 16.)
Jean Shepherd is examining two new products his company may begin sellingFlick and Brunner. His ultimate decision will be based on choosing the product with the lowest risk. The following data is collected and presented below.
Standard Deviation
of Return
14.)
What is the coefficient of variation for Flick?
a. 0.454
b. 2.202
c. 0.016
d. 0.269
15.)
What is the coefficient of variation for Brunner?
a. 3.877
b. 0.016
c. 0.258
d. 0.317
16.)
If the firm wishes to minimize risk, which alternative do you recommend?
a. Flick
b. Brunner
17. 18.)
Assuming the rates of return associated with a given asset investment are normally distributed; the expected return is 25%; and the coefficient of variation is 0.32.
17.)
What is the standard deviation of returns?
a. 78.1%
b. 1.3%
c. 24.7%
d. 8.0%
18.)
What is the highest possible expected return associated with the 95% probability occurrence?
a. 33.0%
b. 41.0%
c. 23.8%
d. 7.6%
Product Expected ReturnStandard Deviation
of Return
Flick 18.5% 8.4% Brunner 25.2% 6.5%Explanation / Answer
14. a> coefficient of variation for Flick=8.4/18.5=0.454
15.c>coefficient of variation for Brunner=6.5/25.2=0.257
16.b>Brunner as the coefficient of variation is lower.
17.a>standard deviation =25/0.32=78.1
18.a> highest possible expected return associated=25*(1+0.7813/2)*0.95=33.0
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