What are the roles of actual returns and expected returns in investment planning?

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jeff jeffy answered 2 years ago

inancial Planning Exercise 1 Ranking investments by expected returns What makes for a good investment? Use...

inancial Planning Exercise 1 Ranking investments by expected returns What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Round the answers to two decimal places. Do not round intermediate calculations. Buy a stock for $45 a share, hold it for 2 years, then sell it for $80 a share (the stock pays annual dividends of $3 a share). % Buy a security for $25,...

Five investment alternatives have the following returns and standard deviations of returns. Alternatives Returns: Expected...

Five investment alternatives have the following returns and standard deviations of returns. Alternatives Returns: Expected Value Standard Deviation A $ 1,110 $ 1,270 B 3,970 820 C 3,970 1,330 D 5,790 2,650 E 12,500 7,350 Calculate the coefficient of variation and rank the five alternatives from lowest risk to the highest risk by using the coefficient of variation. (Round your answers to 3 decimal places.)

What are her expected returns and the risk from her investment in the three assets? How...

What are her expected returns and the risk from her investment in the three assets? How do they compare with investing in asset M alone? Hint: Find the standard deviations of asset M and of the portfolio equally invested in assets M, N, and O. b. Could Sally reduce her total risk even more by using assets M and N only, assets M and O only, or assets N and O only? Use a 50/50 split between the asset pairs,...

Suppose that the returns on an investment are normally distributed with an expected return of 8%...

Suppose that the returns on an investment are normally distributed with an expected return of 8% and standard deviation of 4%. What is the likelihood of making a negative return? (Hint: the area under a curve for 1 std dev is 34.13%, 2 std dev is 47.73% and 3 std dev is 49.87%). A. 47.73% B. 34.13% C. 15.87% D. 2.27%

Chapter 12 Financial Planning Exercise 1 Ranking investments by expected returns What makes for a good...

Chapter 12 Financial Planning Exercise 1 Ranking investments by expected returns What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Round the answers to two decimal places. Do not round intermediate calculations. Buy a stock for $45 a share, hold it for 2 years, then sell it for $80 a share (the stock pays annual dividends of $3 a share). % Buy a security...

A decrease in expected returns on investment will most likely shift the AD curve to the:...

A decrease in expected returns on investment will most likely shift the AD curve to the: A. Right because C will increase B. Left because C will decrease C. Right because I will increase D. Left because I will decrease An increase in personal income taxes would shift AD to the: A. Right because C will increase B. Left because C will decrease C. Right because G will increase D. Left because G will decrease An increase in expected future...

Briggs Excavation Company is planning an investment of $154,500 for a bulldozer. The bulldozer is expected...

Briggs Excavation Company is planning an investment of $154,500 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for five years. Customers will be charged $110 per hour for bulldozer work. The bulldozer operator costs $33 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $43 per hour of bulldozer operation. Present Value of an Annuity of $1 at...

Briggs Excavation Company is planning an investment of $360,400 for a bulldozer. The bulldozer is expected...

Briggs Excavation Company is planning an investment of $360,400 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for five years. Customers will be charged $130 per hour for bulldozer work. The bulldozer operator costs $30 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $39 per hour of bulldozer operation. Present Value of an Annuity of $1 at...

Jones Excavation Company is planning an investment of $177,900 for a bulldozer. The bulldozer is expected...

Jones Excavation Company is planning an investment of $177,900 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for five years. Customers will be charged $120 per hour for bulldozer work. The bulldozer operator costs $38 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $50 per hour of bulldozer operation. Present Value of an Annuity of $1 at...

Briggs Excavation Company is planning an investment of $307,300 for a bulldozer. The bulldozer is expected...

Briggs Excavation Company is planning an investment of $307,300 for a bulldozer. The bulldozer is expected to operate for 2,000 hours per year for five years. Customers will be charged $120 per hour for bulldozer work. The bulldozer operator costs $31 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $20,000. The bulldozer uses fuel that is expected to cost $41 per hour of bulldozer operation. Present Value of an Annuity of $1 at...

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