1. What is do we mean by “risk” in the finance discipline? Pick a stock and calc

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Question

1. What is do we mean by “risk” in the finance discipline? Pick a stock and calculate the “risk” based on the last 250 trading days.

14. Give an example (of each) of a test you could conduct that would refute strong form, semi-strong form, and weak form efficiency.

15. What is the pecking order theory? Name a company that probably uses pecking order in their capital budgeting decisions

16. What did Modigliani and Miller do that is significant in finance? What assumptions did they make to prove their hypothesis?

17. Look up the WACC of a large company and report the capital structure of the firm.

1) On finance risk means the probabitiy that actual return on investment is lesser than the expected return.

We can caluclate the standard deviation of stock which is a measure of risk of comapany and also coefficent of variation.

Example: Take a stock calculate the return of stock on every trading day and use STDEV.S formulae for standard deviation of stock.

Price Return(%)

day 1: $50

day 2:$48 -4%

day 3:$52 8%

dy 4: 55 6%

In excel using stdev.s we can find standard devaition.

= stdev.s(-4%,8%,6%)=7.57%

Coefficent of variation= mean/std= [(-4%+8%+6%)/3]/7.57%=0.44. It tells the return per unit of risk involved.

Same way you can values for 250 trading days and calculate

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