Question

In: Finance

1. Risk from investing in a security refers to: a. volatility of security price b. uncertainty...

1. Risk from investing in a security refers to:

a. volatility of security price

b. uncertainty about the future stock price

c. volatility of security returns

d. probability of loss from investing in the security

2. The expected value of annual returns of a portfolio is 10 percent with standard deviation of 20 percent. The compounded annual growth rate from investing in the portfolio is expected to be:

a. 10 percent

b. less than 10 percent

c. more than 10 percent

d. indeterminable

3. The price of a stock is $20. The stock is not expected to pay any dividend for the foreseeable future. The probability of the price next year being more than $40 is

      a. 0 percent

      b. the same as the return being more than $20

      c. the same as the return being more than 100 percent

     d. indeterminable

Solutions

Expert Solution

1)

Risk from investing in a security refers to

c) volatility of security returns

2)

The expected value of annual returns of a portfolio is 10 percent with standard deviation of 20 percent. The compounded annual growth rate from investing in the portfolio is expected to be

d. indeterminable

3)

The price of a stock is $20. The stock is not expected to pay any dividend for the foreseeable future. The probability of the price next year being more than $40 is

c. the same as the return being more than 100 percent

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

The type of risk associated with the price volatility of a security is known as a....
The type of risk associated with the price volatility of a security is known as a. liquidity risk. b. financial risk. c. market risk. d. business risk.
A risk-free security is one with no uncertainty in its future payoffs. Hence, there is no...
A risk-free security is one with no uncertainty in its future payoffs. Hence, there is no volatility, and so the variance of its return is 0. According to the CAPM, is it possible that a security with a positive variance can have a required return that is less than the risk free rate? If so, explain what characteristics this asset needs to have and why this would mean an investor would accept a return less than the risk free rate...
Betas: Stock Volatility Conceptual Overview: Explore how stock volatility relates to the beta coefficient b risk...
Betas: Stock Volatility Conceptual Overview: Explore how stock volatility relates to the beta coefficient b risk measure. The tendency of a stock to move with the market is measured by its beta coefficient, b. When first loaded, the graph shows the line for an average stock, which necessarily matches the market return. In a year when the market returns 10%, the average stock returns 10%. And in a year when the market goes down -10%, the average stock goes down...
TRUE or FALSE 1). The increase in the volatility of the security has the impact of...
TRUE or FALSE 1). The increase in the volatility of the security has the impact of the increase in the value of the call option and the decrease in the value of the put option. 2)An investor may acquire a call option to protect a short selling position. Thank you
A stock price is currently AUD 70; the risk-free rate is 5% and the volatility is...
A stock price is currently AUD 70; the risk-free rate is 5% and the volatility is 30%. What is the value of a two-year American put option with a strike price of AUD 72
1. Select all the answers that apply.  _____________ refers to how errors or uncertainty in one variable...
1. Select all the answers that apply.  _____________ refers to how errors or uncertainty in one variable multiply when that variable becomes part of a function involving other variables that might involve a certain degree of uncertainty or error as well. IAMs include _______ of the parameters to solve this problem. Propagation of Error; probability distributions Uncertainty Explosions; discount rates Uncertainty Explosions; probability distributions Cascading Uncertainties; discount rates 2.The problem with program-specific CBAs is that _________________________. the benefits are perceived in...
HOW TO DO B PLEASE EXPLAIN IN DETAIL One measure of the risk or volatility of...
HOW TO DO B PLEASE EXPLAIN IN DETAIL One measure of the risk or volatility of an individual stock is the standard deviation of the total return (capital appreciation plus dividends) over several periods of time. Although the standard deviation is easy to compute, it does not take into account the extent to which the price of a given stock varies as a function of a standard market index, such as the S&P 500. As a result, many financial analysts...
Can Black-Scholes PDE describe an option price dynamic with volatility risk? Explain
Can Black-Scholes PDE describe an option price dynamic with volatility risk? Explain
A futures price is currently $3000 and its volatility is 25%. The risk-free interest rate is...
A futures price is currently $3000 and its volatility is 25%. The risk-free interest rate is 5% per annum. a) Use a two-step binomial tree to derive the value today of a one-year European put option with a strike price of $2900 written on the futures contract. b) Use put-call parity to value the one-year European call option with a strike price of $2900 written on the futures contract. c) How would you hedge today a short position in the...
A futures price is currently $3000 and its volatility is 25%. The risk-free interest rate is...
A futures price is currently $3000 and its volatility is 25%. The risk-free interest rate is 5% per annum. a) Use a two-step binomial tree to derive the value today of a one-year European put option with a strike price of $2900 written on the futures contract. b) Use put-call parity to value the one-year European call option with a strike price of $2900 written on the futures contract. c) How would you hedge today a short position in the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT