Question

In: Finance

Which of the following investments is riskier? Why? Probability Rate of   Rate of Rate of   ...

Which of the following investments is riskier? Why?

Probability Rate of   Rate of Rate of
   of Occurrence Return   Return Return
A   B   C
0.20 2.00% 4.00% 2.00%
0.25 4.00% 4.00% 2.30%
0.40 5.50% 4.50% 6.00%
0.15 6.00% 6.00% 7.50%

Solutions

Expert Solution

A)

B)

C)


Related Solutions

which mortgage is riskier for lender? fixed rate mortgage to adjustable rate mortgage? And why does...
which mortgage is riskier for lender? fixed rate mortgage to adjustable rate mortgage? And why does the adjustable rate mortgage have lower expected yield?
Flight to quality is the action of investors moving their capital away from riskier investments to...
Flight to quality is the action of investors moving their capital away from riskier investments to safer ones. Uncertainty in the financial or international markets usually causes this herd-like shift. However, at other times, the move may be an instance of individual or smaller groups of investors cutting back on the more volatile investments for conservative ones. Discuss the relationship between flight to quality and stock market liquidity with the view of systematic risk and unsystematic risk. Why is flight...
Committing large investments to a single project is always risky, and it becomes even riskier when...
Committing large investments to a single project is always risky, and it becomes even riskier when a competitor is set to do the same thing and the market is not ready to sustain two rival products.  In the game called "The Innovator's Dilemma" (or "The Developer's Dilemma"), there are two identical firms, A and B, and each can make one of two choices, to invest in the development of a new product or not to invest. If only one of the...
Which one of the following investments provides the highest effective annual rate of return (i.e., which...
Which one of the following investments provides the highest effective annual rate of return (i.e., which of the following investments is the BEST = the largest EAR) over an investment horizon of 10 years)? a. An investment which has a 3.0 percent nominal rate with annual compounding. b. An investment which has a 2.98 percent nominal rate with semi-annual compounding. c. An investment which has a 2.965 percent nominal rate with quarterly compounding. d. An investment which has a 2.9575...
Which one of the following investments provides the highest effective annual rate of return (i.e., which...
Which one of the following investments provides the highest effective annual rate of return (i.e., which of the following investments is the BEST = the largest EAR) over an investment horizon of 10 years)? a. An investment which has a 3.0 percent nominal rate with annual compounding. b. An investment which has a 2.98 percent nominal rate with semi-annual compounding. c. An investment which has a 2.965 percent nominal rate with quarterly compounding. d. An investment which has a 2.9575...
Which of the following statements is CORRECT? Select one: If the stock becomes riskier, its price...
Which of the following statements is CORRECT? Select one: If the stock becomes riskier, its price increases. When the yield curve is strictly downward sloping, the term spread must be negative. Legal tender is the provision that shields owners of a corporation from losing more than what they have invested in the firm. The market capitalization of a corporation is the total market value of its stocks and bonds.
Why are Treasury Bills a riskier option than Treasury Notes?
Why are Treasury Bills a riskier option than Treasury Notes?
11. Which one of the following investments provides the highest effective annual rate of return (i.e.,...
11. Which one of the following investments provides the highest effective annual rate of return (i.e., which of the following investments represents the largest EAR), assuming an investor wants to avoid earning the lowest return over an investing horizon of 10 years? a. An investment which has a 3.0 percent nominal rate with annual compounding. b. An investment which has a 2.98 percent nominal rate with semi-annual compounding. c. An investment which has a 2.965 percent nominal rate with quarterly...
If the interest rate is 6%, which of these investments would you prefer?
If the interest rate is 6%, which of these investments would you prefer? A single payment of $500 in year 3 A payment of $40 a year for 20 years starting in one year's time A perpetuity of $30 a year starting in one year's time A payment of $342.17 today
Why is it more difficult and riskier to collect receivables from a foreign purchaser?
Why is it more difficult and riskier to collect receivables from a foreign purchaser?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT