Choose the most appropriate risk corresponding to each statement. The price of stocks fluctuate every day. Answer 1 Question 20 The central bank may have raised or lowered its policy rate one year from now. Answer 2 Question 20 The price of gasoline at the pump has risen reflecting the unexpected rise in crude oil prices. Answer 3 Question 20 The new model of EV released by Tesla sold poorly. Answer 4 Question 20 When I sold stock, I could only sell it for far lower than the last quoted price. Answer 5 Question 20
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You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The table presents the annual return (per $1,000) of each of these investments under different economic conditions and the probability that each of these economic conditions will occur. Complete parts (a) through (d) below. Probability, Economic Condition, Corporate Bond Fund, Common Stock Fund 0.02, Extreme recession, -200, -990 0.08, Recession, -70, -300 0.15, Stagnation, 30, -100 0.30, Slow growth, 70, 90 0.35, Moderate growth, 100, 150 0.10, High growth, 110, 300 a. Calculate the expected return for the corporate bond fund and for the common stock fund. The expected return for the corporate bond fund is (Round to the nearest cent as needed.) The expected return for the common stock fund is (Round to the nearest cent as needed.) b. Calculate the standard deviation for the corporate bond fund and for the common stock fund. The standard deviation for the corporate bond fund is (Round to the nearest cent as needed.) The standard deviation for the common stock fund is (Round to the nearest cent as needed.) c. Would you invest in the corporate bond fund or the common stock fund? Explain. Based on the expected value, the ____ fund should be chosen. Since the standard deviation for the common stock fund is _________ that for the corporate bond fund, the common stock fund _________ the corporate bond fund and an investor ________ the risk when making a decision. d. If an investor chooses to invest in the common stock fund in (c), what should the investor think about the possibility of losing $980 of every $1,000 invested if there is an extreme recession? A. The investor would need to assess how to respond to the almost certainty that almost all of the investment could be lost. B. The investor would need to assess how to respond to the small possibility that almost all of the investment could be lost. C. The investor would need to assess how to respond to the small possibility that about 10% of the investment could be lost. D. The investor would need to assess how to respond to the almost certainty that about 10% of the investment could be lost.
Sri K.
You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The table presents the annual return (per $1,000) of each of these investments under different economic conditions and the probability that each of these economic conditions will occur. Complete parts (a) through (d) below. Probability Economic Condition Corporate Bond Fund Common Stock Fund 0.01 Extreme recession -300 -980 0.09 Recession -40 -350 0.20 Stagnation 30 -50 0.25 Slow growth 70 130 0.30 Moderate growth 80 150 0.15 High growth 90 350 a. Calculate the expected return for the corporate bond fund and for the common stock fund. The expected return for the corporate bond fund is ________ (Round to the nearest cent as needed.) The expected return for the common stock fund is ________ (Round to the nearest cent as needed.) b. Calculate the standard deviation for the corporate bond fund and for the common stock fund. The standard deviation for the corporate bond fund is ________ (Round to the nearest cent as needed.) The standard deviation for the common stock fund is ________ (Round to the nearest cent as needed.) c. Would you invest in the corporate bond fund or the common stock fund? Explain. Based on the expected value, the ________ fund should be chosen. Since the standard deviation for the common stock fund is ________ that for the corporate bond fund, the common stock fund ________ the corporate bond fund and an investor the risk when making a decision. If an investor chooses to invest in the common stock fund in (c), what should the investor think about the possibility of losing $995 of every $1,000 invested if there is an extreme recession? A. The investor would need to assess on how to respond to the almost certainty that about 10% of the investment could be lost. B. The investor would need to assess on how to respond to the small possibility that almost all of the investment could be lost. C. The investor would need to assess on how to respond to the almost certainty that almost all of the investment could be lost. D. The investor would need to assess on how to respond to the small possibility that about 10% of the investment could be lost.
Umar Sohail Q.
You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The information to the right about the annual return (per $1,000) of each of these investments under different economic conditions is available, along with the probability that each of these economic conditions will occur. Probability Economic Condition Bond Fund StockFund 0.01 Extreme_recession -250 -999 0.09 Recessio -60 -300 0.20 Stagnation 30 -150 0.30 Slow_growth 80 150 0.35 Moderate_growth 100 200 0.05 High_growth 120 350 a. Compute the expected return for the corporate bond fund and for the common stock fund. b. Compute the standard deviation for the corporate bond fund and for the common stock fund. c. Would you invest in the corporate bond fund or the common stock fund? d. If you chose to invest in the common stock fund in (c), what do you think about the possibility of losing $950 of every $1,000 invested if there is an extreme recession? Round to 2 decimal places as needed
Taha T.
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