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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?
A corporation's last dividend was $1. Its dividend growth rate is expected to be constant at 15 percent for two years, after which dividends are expected to grow at a rate of 10% forever. The required return is 12%.
Trident Food Company generated th following income statement for the most recent fiscal year. Every item of inventory Trident Foods produces has a selling price of $20
Suppose your employer, hates the company's current telephone system. By investing $60,000 in a new phone system, he thinks that he can improve revenue through fewer misdirected sales inquiry calls,
Computation of projects using cost-benefit analysis which alternative should be selected and use benefit-cost ratio analysis to solve the problem
Discuss and explain different ways a financial manager can determine his or her future financing needs. Include ways of estimating the need for external financing.
Computation of Operating Cash flows and described in the module and verify that the answer is the same in each case
A corporation has just been taken over through new management which believes that it can raise earnings before taxes from $600 to $1,000, merely by cutting overtime pay and thus decreasing cost of goods sold.
On the 1st December 2011, Betty, Alvin & Yogee started a watch trading company, Baywatch Pvt. Ltd. with a paid up capital of $150,000 to be subscribed equally by the three (3).
The future value of an investment increases as the number of years of compounding at a positive rate of interest declines. Determine which of the following statements best represents what finance is about.
Describe about investments and stock returns are independent-one stock in increasing in price has no effect on the prices of the other stocks
How long will it take to achieve payback on the initial $2,000,000 TQM investment, rounded to the nearest month?
How would you measure the corporation's revenue performance over the last few years( for example, is it incresing, declining, stagent)? what are the reasons for your assessment? What factors will have the greatest influence on the evaluation o..
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