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A fundamental concept in finance is the risk versus return concept. The more the risk involved with an investment, the greater will be the required rate of return for that investment. Different investors have different risk tolerance levels. Some investors may choose not to invest in stocks because they do not like the volatility of the stock market. Others may choose more conservative approaches, such as investing in high quality, intermediate-term bonds, because they prefer the reduced volatility of such an investment as compared to the stock market. From 1926 through 2008: Small-company stocks had an arithmetic mean return of 16.4% and a standard deviation of 33%. Large-company stocks had an arithmetic mean return of 11.7% and a standard deviation of 20.6%. Long-term corporate bonds had an arithmetic mean return of 6.2% and a standard deviation of 8.4%. Long-term government bonds had an arithmetic mean return of 6.1% and a standard deviation of 9.4%. Intermediate-term government bonds had an arithmetic mean return of 5.6% and a standard deviation of 5.7%. U.S. Treasury bills had an arithmetic mean return of 3.8% and a standard deviation of 3.1%. Sources: Adapted with permission from Ibbotson, R. G., & Sinquefield, R. A. (2009). Stocks, bonds, bills and inflation yearbookTM. Chicago: Morningstar. Ross, S. A., Westerfield, R. W., & Jaffe, J. (2010). Corporate finance. New York: McGraw-Hill. Historically, large U.S. stocks have produced higher average annual returns than U.S. Treasury bills. However, in some years, such as 2008, the U.S. Treasury bills outperformed large U.S. stocks. Why do you think this happened?
your firmrsquos strategic plan calls for a net increase in total assets of 100 million during the next five years which
It is often said that anyone with a pencil can calculate financial ratios, but it takes a brain to interpret them. Explain the kinds of things should an analyst keep in mind when evaluating the financial statements of a given firm.
You are in charge of a project that has a degree of operating leverage of 2.64. What will happen to the operating cash flows if the number of units you sell increase by 4 percent?
Discuss the validity of the following statements in both the short run and long run.
Compute the future value of income
Determine the total income the company must get its sales to cover the Total Fixed Cost, Total Variable Costs and the expected gain.
ABC Inc. borrows 100m JPY when JPY spot rate is JPY120/$. The JPY interest rate for the loan is 3%. One year later when ABC pays back the JPY principal and interest, the exchange rate is JPY 95/$. What is the dollar cost of ABC's JPY loan?
Determine which of the following motivates corporations to enter into stock repurchase programs?
How much did he actually pay for this bond? Assume that the accrual interest calculation uses the actual number of day.
Ensco Lighting Corporation has fixed costs of $100,000, sells its units for $28, and has variable costs of $15.50 per unit.
the current price of a non-dividend-paying stock is 30. over the next six months it is expected to rise to 36 or fall
1. Using Wal-Mart (publicly traded company), calculate the balance sheet-based accruals and cash flow-based accruals ratios. 2. Analyze the ratios and other information,of Wal -Mart and write an assessment of financial reportin..
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