Two stock prices for six days are given below. Price A Price B 25 55 29 60 33 61 29 63 26 61 29 60 Calculate: Average return of both stock Standard deviation of each stock Coefficient of Variation of each stock Which stock is less risky based on Standard deviation? Which stock you will select based on Coefficient of variation
Two stock prices for six days are given below. Price A Price B 25 55 29 60 33 61 29 63 26 61 29 60 Calculate: Average return of both stock Standard deviation of each stock Coefficient of Variation of each stock Which stock is less risky based on Standard deviation? Which stock you will select based on Coefficient of variation
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter5: Financial Options
Section: Chapter Questions
Problem 3Q
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Concept explainers
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
Two stock prices for six days are given below.
Price A |
Price B |
25 |
55 |
29 |
60 |
33 |
61 |
29 |
63 |
26 |
61 |
29 |
60 |
Calculate:
- Average return of both stock
- Standard deviation of each stock
- Coefficient of Variation of each stock
- Which stock is less risky based on Standard deviation?
- Which stock you will select based on Coefficient of variation?
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