Estimating-Risk-and-Return-measurement-technique-accounting-homework-help
Need serious, but honest help to meet my dead line. Instruction as following questions using grammatically correct language and appropriate APA citations. All questions need to be answer and with APA citations. All material MUST come from the book only. (The book that used is Finance by Cornett, Adair, & Nofsinger, 2016). Chapter 9 Characterizing Risk and Return Pages 216- 239 and Chapter 10 Estimating Risk and Return pages 240-263 Be sure when solving the problems algebraically, be sure to show your computations. If using Excel spreadsheet, show your input values and formula. If using financial calculator, show your input values. There are some hints/suggestions for certain questions in this assignment to ensure you have the right answer.
**Note: In addition to your solution to each computational problem, you must show the supporting work leading to your solute.****
***Questions 4, 6, 7, 10, 11, 12, 13, and 14 entail working quantitative problems demonstrating your understanding of return and risk measurement technique. ****
Question 1:
Proficient-level: “How do Cornett, Adair, and Nofsinger define risk in the M: Finance textbook and how is it measured?” (Cornett, Adair, & Nofsinger, 2016).
Distinguished-level: Describe the risk relationship between stocks, bonds, and T-bills, using the standard deviation of returns as the measure of risk.
Question 2:
Proficient-level: “What is the source of firm-specific risk? What is the source of market risk?” (Cornett, Adair, & Nofsinger, 2016, p. 233).
Distinguished-level: Identify which of the two types of risk can be reduced through diversification.
Question 3:
Proficient-level: “What does the coefficient of variation measure?” (Cornett, Adair, & Nofsinger, 2016, p. 233).
Distinguished-level: Explain why a lower coefficient of variation is better for an investor.
Question 4: HINT- The correct dollar return will fall within the range of $799 and the correct percentage return will fall within the range of 2.50% and 3.99%. Be sure to SOLVE and SHOW the percentage response out to FOUR DECIMAL PLACE. (REMINDER: YOU are also REQUIRED TO IDENTIFY the known variable in order to obtain the correct response to this and all QUANTITATIVE PROBLEMS.)
Proficient-level: “FedEx Corp stock ended the previous year at $103.39 per share. It paid a $0.35 per share dividend last year. It ended last year at $106.69. If you owned 200 shares of FedEx, what was your dollar return and percent return?” (Cornett, Adair, & Nofsinger, 2016, p. 234).
Distinguished-level: Explain why a percentage return can be more useful than a dollar return.
Question 5:
Proficient-level: “Rank the following three stocks by their level of total risk, highest to lowest. Rail Haul has an average return of 12 percent and standard deviation of 25 percent. The average return and standard deviation of Idol Staff are 15 percent and 35 percent; and of Poker-R-Us are 9 percent and 20 percent” (Cornett, Adair, & Nofsinger, 2016, p. 234).
Distinguished-level: Describe the components of the standard deviation formula.
Question 6: HINT- CORRECT COEFFICIENT of Variation for RAIL HAUL is 2.08. REMINDER: YOU are also REQUIRED TO IDENTIFY the known variable in order to obtain the correct response to this and all QUANTITATIVE PROBLEMS
Proficient-level: “Rank the following three stocks by their risk return relationship, best to worst. Rail Haul has an average return of 12 percent and standard deviation of 25 percent. The average return and standard deviation of Idol Staff are 15 percent and 35 percent; and of Poker-R-Us are 9 percent and 20 percent” (Cornett, Adair, & Nofsinger, 2016, p. 234). Before solving this problem, calculate the coefficient of variation.
Distinguished-level: Explain how the coefficient of variation acts as a trade-off between risk and return.
Question 7: HINT- CORRECT PORTFOLIO return will fall within the range of NEGATIVE 1.00% and POSITIVE 2.99%. ( REMINDER: YOU are also REQUIRED TO IDENTIFY the known variable in order to obtain the correct response to this and all QUANTITATIVE PROBLEMS)
Proficient-level: “Year-to-date, Oracle had earned a −1.34 percent return. During the same time period, Valero Energy earned 7.96 percent and McDonald’s earned 0.88 percent. If you have a portfolio made up of 30 percent Oracle, 25 percent Valero Energy, and 45 percent McDonald’s, what is your portfolio return?” (Cornett, Adair, & Nofsinger, 2016, p. 235).
Distinguished-level: Explain the role of weights in determining portfolio return.
Question 8:
Proficient-level: “Why is expected return considered forward-looking? What are the challenges for practitioners to utilize expected return?” (Cornett, Adair, & Nofsinger, 2016, p. 258).
Distinguished-level: Explain the role of probability distribution in determining expected return.
Question 9:
Proficient-level: “Describe how different allocations between the risk-free security and the market portfolio can achieve any level of market risk desired” (Cornett, Adair, & Nofsinger, 2016. p. 258).
Distinguished-level: Provide examples of a portfolio for someone who is very risk averse and for someone who is less risk averse.
Question 10: HINT – CORRET EXPECTED return in falls within the range of 5.00 to 9.99%. (REMINDER: YOU are also REQUIRED TO IDENTIFY the known variable in order to obtain the correct response to this and all QUANTITATIVE PROBLEMS)
Proficient-level: Refer to the table below to complete this question. “Compute the expected return given these three economic states, their likelihoods, and the potential returns” (Cornett, Adair, & Nofsinger, 2016, p. 259).
Distinguished-level: Recalculate the expected return under a set of changed economic probabilities.
Question 11: HINT- CORRECT REQUIRED RETURN falls within the RANGE of 7.00% and 8.99% . ( REMINDER: YOU are also REQUIRED TO IDENTIFY the known variable in order to obtain the correct response to this and all QUANTITATIVE PROBLEMS).
Proficient-level: “If the risk-free rate is 3 percent and the risk premium is 5 percent, what is the required return?” (Cornett, Adair, & Nofsinger, 2016, p. 259).
Distinguished-level: Identify which financial security’s return is typically considered the risk-free rate.
Question 12: HINT- CORRECT AVERAGE MARKET RS+ISK PREMIUM ON THE S & P 500 falls within the range of 0.00% and 11.99%. ( REMINDER: YOU are also REQUIRED TO IDENTIFY the known variable in order to obtain the correct response to this and all QUANTITATIVE PROBLEMS)
Proficient-level: “The average annual return on the Standard and Poor’s 500 Index from 1986 to 1995 was 15.8 percent. The average annual T-bill yield during the same period was 5.6 percent. What was the market risk premium during these 10 years?” (Cornett, Adair, & Nofsinger, 2016, p. 259).
Distinguished-level: Define, in your own words, the term, market risk premium.
Question 13: HINT- CORRECT REQUIRE RETURN FOR HASTINGS FALLS within the range of 6.00% and 9.99%, ( REMINDER: YOU are also REQUIRED TO IDENTIFY the known variable in order to obtain the correct response to this and all QUANTITATIVE PROBLEMS).
Proficient-level: “Hastings Entertainment has a beta of 0.65. If the market return is expected to be 11 percent and the risk-free rate is 4 percent, what is Hastings’ required return?” (Cornett, Adair, & Nofsinger, 2016, p. 259). Use the capital asset pricing model to calculate Hastings’ required return.
Distinguished-level: Recalculate the required return with a change to beta, and explain the effect of a 1.0 increase in beta on the subsequent amount of change in the required return.
Question 14: HINT – CORRECT PORTFOLIO BETA WILL fall BETWEEN the range of -1.00% and 2.99%. (REMINDER: YOU are also REQUIRED TO IDENTIFY the known variable in order to obtain the correct response to this and all QUANTITATIVE PROBLEMS).
Proficient-level: Calculate the beta of your portfolio, which comprises the following items: (a) Olympic Steel stock, which has a beta of 2.2 and comprises 40 percent of your portfolio, (b) Rent-A-Center stock, which has a beta of 1.5 and comprises 28 percent of your portfolio, and (c) Lincoln Electric stock, which has a beta of 0.5 and comprises 32 percent of your portfolio (Cornett, Adair, & Nofsinger, 2016).
Distinguished-level: Determine whether the portfolio has less risk, equal risk, or more risk compared to the overall market.
|
Economic State |
Probability |
Return |
|
Fast Growth |
0.30 |
40% |
|
Slow Growth |
0.40 |
10% |
|
Recession |
0.30 |
−25% |
Question 15:
Chapter 10 in the M: Finance textbook by Cornett, Adair, and Nofsinger discusses aspects of both risk and return. Risk and return can be seen as two sides of the same coin. In other words, risk and return are inexorably intertwined. Beta is one measure of market risk. Review Chapter 10, with particular emphasis on the “Market Risk” section of this chapter. Address the following:
-In your own words, what is the meaning of the terms beta and capital asset pricing model?
-Select three stocks from the listing of the Dow Jones Industrial Average Stock Betas from Table 10.2 of the textbook. List these three stocks, along with their corresponding beta. Which one of the three stocks in your list is least risky? Why? Which one of the three stocks in your list is most risky? Why?
-If the beta of a portfolio of stocks was calculated to be 1.0, how should your portfolio react to changes in the overall market?
-If you assembled a mix of stocks for a financial portfolio for your personal use, would you prefer a low beta, a beta of 1.0, or a high beta? Why?
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