1.
How do you think risk should be measured? Explain your reasoning.
2.
Explain what is meant by “risk drives expected return”.
3.
For Asset A and for Asset B, compute the average annual return, variance, standard deviation, and coefficient of variation for the annual returns given below.
a. Asset A: 5%, 10%, 15%, 4%
b. Asset B: -6%, 20%, 2%, -5%, 10%
4.
Compute the holding period returns for each security below:
|
Security |
Price Today |
Price One Year Ago |
Dividends Received |
Interest Received |
|
RR |
$20.05 |
$18.67 |
$0.50 |
|
|
WC |
$33.42 |
$45.79 |
$1.10 |
|
|
AC |
$1,015.38 |
$991.78 |
$100.00 |
5.
Find the real return, nominal after-tax return, and real after-tax return for each of the following stocks:
|
Stock |
Nominal Return |
Inflation |
Tax Rate |
|
X |
13.5% |
5% |
15% |
|
Y |
8.7% |
4.7% |
25% |
|
Z |
5.2% |
2.5% |
28% |
6.
In what ways does a proprietorship differ from a partnership? In what ways does a proprietorship differ from a corporation?
7.
What information might a changing stock price give to managers?
8.
What are agency costs? Give some examples. How might they be measured?
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