Suppose an investor wants to invest either in the common stock of Square Corporation or Beximco Corporation. Square Corporation offers investors an expected rate of return equal to 39%, with a standard deviation of 20%. Square offers a higher expected return than Beximco Corporation (the expected rate of return equals 31%, and the standard deviation equals 18%), but it is also riskier. The variance for Square Corporation is 400, and Bexlmco Corporation is 324. Concerning both risk and return, which corporation has lower risk per unit of return, and which investment would be the better investment? Why? Show calculation and explain with necessary numerical data.

Suppose an investor wants to invest either in the common stock of Square Corporation or Beximco Corporation. Square Corporation offers investors an expected rate of return equal to 39%, with a standard deviation of 20%. Square offers a higher expected return than Beximco Corporation (the expected rate of return equals 31%, and the standard deviation equals 18%), but it is also riskier. The variance for Square Corporation is 400, and Bexlmco Corporation is 324. Concerning both risk and return, which corporation has lower risk per unit of return, and which investment would be the better investment? Why? Show calculation and explain with necessary numerical data.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 3P

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