02-11-2010, 02:48 PM
Good Day colleqs
This are the annual cash flows and beginning and end-of-year values of each asset over the immediately preceding 3years.
<u>Principles of Managerial Finance - By Lawrence J. Gitman </u>
<u>Return Data for Assets A and B 2000 - 2002</u>
Asset A Asset B
Year Cashflow Begin Ending Cashflow Begin Ending
2000 1000 20000 22000 1500 20000 20000
2001 1500 22000 21000 1600 20000 20000
2002 1400 21000 24000 1700 20000 21000
Each asset's risk can be assessed in two waysin isolation and as part of the firm's diversified portfolio of assets.STD deviation & coefficient of variation of returns can be used to find the risk of assets in isolation.CAPM can be use to assess the assets risk as part of the firm's portfolio of assets.Estimated betas for assets A & B is 1.60 & 1.10 respectively.Risk-free rate is currently 7% and the market return is 10%.
<u>Question </u> is what will be the annual rate of return for each asset in each of the 3preceding years,than use those values to find the average annual rate of return for each asset over the 3yr.Using those returns to calculate the risk of those returns for each asset over the 3yrs.
This are the annual cash flows and beginning and end-of-year values of each asset over the immediately preceding 3years.
<u>Principles of Managerial Finance - By Lawrence J. Gitman </u>
<u>Return Data for Assets A and B 2000 - 2002</u>
Asset A Asset B
Year Cashflow Begin Ending Cashflow Begin Ending
2000 1000 20000 22000 1500 20000 20000
2001 1500 22000 21000 1600 20000 20000
2002 1400 21000 24000 1700 20000 21000
Each asset's risk can be assessed in two waysin isolation and as part of the firm's diversified portfolio of assets.STD deviation & coefficient of variation of returns can be used to find the risk of assets in isolation.CAPM can be use to assess the assets risk as part of the firm's portfolio of assets.Estimated betas for assets A & B is 1.60 & 1.10 respectively.Risk-free rate is currently 7% and the market return is 10%.
<u>Question </u> is what will be the annual rate of return for each asset in each of the 3preceding years,than use those values to find the average annual rate of return for each asset over the 3yr.Using those returns to calculate the risk of those returns for each asset over the 3yrs.
