FINANCE - principles of managerial finance | COMPLETE QUESTIONS
AND ANSWERS | 100% RATED CORRECT | 2024-2025 LATEST
UPDATED
portfolio - (answers)A collection or group of assets.
risk - (answers)A measure of the uncertainty surrounding the return that an investment will earn.
total rate of return - (answers)The total gain or loss experienced on an investment over a given
period expressed as a percentage of the investment's value; calculated by dividing the asset's cash
distributions during the period, plus change in value, by its beginning-of-period value.
Rt = Ct + Pt - Pt-1 / (Pt-1)
你是想要一篇“眼睛容易阅读
expected return - (answers)The return that an的”中文文章
asset is expected to generate in the future,
composed of a risk-free rate plus a risk premium.
treasury bond - (answers)government bond issued by the US Treasury.
common stock - (answers)A unit of ownership, or equity, in a corporation. shares entitling their
holder to dividends that vary in amount and may even be missed, depending on the fortunes of
the company.
average nominal return - (answers)the amount of money generated by an investment before
factoring in expenses such as taxes, investment fees, and inflation. If an investment generated a
10% return, the nominal rate would equal 10%.
,average real return - (answers)what is earned on an investment after accounting for taxes and
inflation. Real returns are lower than nominal returns, which do not subtract taxes and inflation.
risk seeking - (answers)The attitude toward risk in which investors prefer investments with
greater risk, perhaps even if they have lower expected returns.
risk neutral - (answers)The attitude toward risk in which investors choose the investment with
the higher expected return regardless of its risk.
risk averse - (answers)The attitude toward risk in which investors require an increased expected
return as compensation for an increase in risk.
equilibrium - (answers)the price at which supply equals demand for a product, in other words
where the hypothetical supply and demand curves intersect.
What is risk in the context of financial decision making? - (answers)A measure of the uncertainty
你是想要一篇“眼睛容易阅读
surrounding the return that an investment will earn
的”中文文章
Define return, and describe how to find the total rate of return on an investment - (answers)-
Return is money earned from an investment.
- To find the total rate of return on investment we must use the formula:
Rt = Ct + Pt - Pt-1 / (Pt-1)
Compare the following risk preferences: (A) risk-averse, (B) risk neutral, and (C) risk seeking.
Which risk preference is most common amongst financial managers? What is the difference
between a risk aversion and risk tolerance? - (answers)- Risk averse investors are willing to take
on higher risk as long as expected returns are increased. Risk neutral investors look for
investments with the highest expected return regardless of risk. Risk seeking investors pursue
riskier investments.
- Risk adverse is the most common risk preference amongst financial managers.
,- Because behaviors related to risk averse investors very widely risk tolerance is used to measure
the degree of risk aversion (an investor's willingness to take risks based on expected
return/compensation). In other words risk tolerance is a measure of risk aversion, while risk
aversion is an investors willingness to take on a risk.
scenario analysis - (answers)An approach for assessing risk that uses several possible alternative
outcomes (scenarios) to obtain a sense of the variability among returns.
range - (answers)- A measure of an asset's risk, which is found by subtracting the return
associated with the pessimistic (worst) outcome from the return associated with the optimistic
(best) outcome.
Intuitively, an asset with a greater range of possible returns seems more risky
probability - (answers)The chance that a given out-come will occur.
probability distribution - (answers)A model that relates probabilities to the associated outcomes
你是想要一篇“眼睛容易阅读
的”中文文章
bar chart - (answers)The simplest type of probability distribution; shows only a limited number
of outcomes and associated probabilities for a given event.
continuous probability distribution - (answers)A probability distribution showing all the possible
outcomes and associated probabilities for a given event.
Standard deviation (ø) - (answers)The most common statistical indicator of an asset's risk; it
measures the dispersion around the average.
nominal probability distribution - (answers)A symmetrical probability distribution whose shape
resembles a "bell-shaped" curve.
coefficient of variation (CV) - (answers)A measure of relative dispersion that is useful in
comparing the risks of assets with differing expected returns.
, explain how the range is used in scenario analysis? - (answers)One common method involves
considering pessimistic (worst), most likely (expected), and optimistic (best) outcomes and the
returns associated with them for a given asset. Given these scenarios, one way to quantify risk is
to measure the range of possible outcomes.
What does a plot of probability distribution of outcomes show a decision maker about an assets
risk - (answers)- Probability: The chance that a given out-come will occur.
- A second and much more sophisticated way of coping with uncertainty in the cash budget is
simulation. By simulating the occurrence of sales and other uncertain events, the firm can
develop a probability distribution of its ending cash flows for each month. The financial decision
maker can then use the probability distribution to determine the amount of financing needed to
protect the firm adequately against a cash shortage.
what relationship exist between the size of the standard deviation and the degree of asset risk? -
(answers)- An asset with a high standard deviation has returns that fluctuate more (higher risk)
than does an asset with a low standard deviation.
- This means that assets with higher standard 你是想要一篇“眼睛容易阅读
deviations are more risky than assets with low
standard deviations. 的”中文文章
* Investments with higher returns have higher standard deviations
what does the coefficient of variation reveal about an investment risk that the standard deviation
does not? - (answers)- Coefficient of variation: the coefficient of variation, also known as
relative standard deviation, is a standardized measure of dispersion of a probability distribution
or frequency distribution.
- The coefficient of variation indicates how volatile an asset's returns are relative to its average or
expected return. Therefore, the coefficient of variation is a better basis than the standard
deviation for comparing risk of assets with differing expected returns.
- A higher coefficient of variation means that an investment has more volatility relative to its
expected return.
- The coefficient of variation, CV, is a measure of relative dispersion that is useful in comparing
the risks of assets with differing expected returns
AND ANSWERS | 100% RATED CORRECT | 2024-2025 LATEST
UPDATED
portfolio - (answers)A collection or group of assets.
risk - (answers)A measure of the uncertainty surrounding the return that an investment will earn.
total rate of return - (answers)The total gain or loss experienced on an investment over a given
period expressed as a percentage of the investment's value; calculated by dividing the asset's cash
distributions during the period, plus change in value, by its beginning-of-period value.
Rt = Ct + Pt - Pt-1 / (Pt-1)
你是想要一篇“眼睛容易阅读
expected return - (answers)The return that an的”中文文章
asset is expected to generate in the future,
composed of a risk-free rate plus a risk premium.
treasury bond - (answers)government bond issued by the US Treasury.
common stock - (answers)A unit of ownership, or equity, in a corporation. shares entitling their
holder to dividends that vary in amount and may even be missed, depending on the fortunes of
the company.
average nominal return - (answers)the amount of money generated by an investment before
factoring in expenses such as taxes, investment fees, and inflation. If an investment generated a
10% return, the nominal rate would equal 10%.
,average real return - (answers)what is earned on an investment after accounting for taxes and
inflation. Real returns are lower than nominal returns, which do not subtract taxes and inflation.
risk seeking - (answers)The attitude toward risk in which investors prefer investments with
greater risk, perhaps even if they have lower expected returns.
risk neutral - (answers)The attitude toward risk in which investors choose the investment with
the higher expected return regardless of its risk.
risk averse - (answers)The attitude toward risk in which investors require an increased expected
return as compensation for an increase in risk.
equilibrium - (answers)the price at which supply equals demand for a product, in other words
where the hypothetical supply and demand curves intersect.
What is risk in the context of financial decision making? - (answers)A measure of the uncertainty
你是想要一篇“眼睛容易阅读
surrounding the return that an investment will earn
的”中文文章
Define return, and describe how to find the total rate of return on an investment - (answers)-
Return is money earned from an investment.
- To find the total rate of return on investment we must use the formula:
Rt = Ct + Pt - Pt-1 / (Pt-1)
Compare the following risk preferences: (A) risk-averse, (B) risk neutral, and (C) risk seeking.
Which risk preference is most common amongst financial managers? What is the difference
between a risk aversion and risk tolerance? - (answers)- Risk averse investors are willing to take
on higher risk as long as expected returns are increased. Risk neutral investors look for
investments with the highest expected return regardless of risk. Risk seeking investors pursue
riskier investments.
- Risk adverse is the most common risk preference amongst financial managers.
,- Because behaviors related to risk averse investors very widely risk tolerance is used to measure
the degree of risk aversion (an investor's willingness to take risks based on expected
return/compensation). In other words risk tolerance is a measure of risk aversion, while risk
aversion is an investors willingness to take on a risk.
scenario analysis - (answers)An approach for assessing risk that uses several possible alternative
outcomes (scenarios) to obtain a sense of the variability among returns.
range - (answers)- A measure of an asset's risk, which is found by subtracting the return
associated with the pessimistic (worst) outcome from the return associated with the optimistic
(best) outcome.
Intuitively, an asset with a greater range of possible returns seems more risky
probability - (answers)The chance that a given out-come will occur.
probability distribution - (answers)A model that relates probabilities to the associated outcomes
你是想要一篇“眼睛容易阅读
的”中文文章
bar chart - (answers)The simplest type of probability distribution; shows only a limited number
of outcomes and associated probabilities for a given event.
continuous probability distribution - (answers)A probability distribution showing all the possible
outcomes and associated probabilities for a given event.
Standard deviation (ø) - (answers)The most common statistical indicator of an asset's risk; it
measures the dispersion around the average.
nominal probability distribution - (answers)A symmetrical probability distribution whose shape
resembles a "bell-shaped" curve.
coefficient of variation (CV) - (answers)A measure of relative dispersion that is useful in
comparing the risks of assets with differing expected returns.
, explain how the range is used in scenario analysis? - (answers)One common method involves
considering pessimistic (worst), most likely (expected), and optimistic (best) outcomes and the
returns associated with them for a given asset. Given these scenarios, one way to quantify risk is
to measure the range of possible outcomes.
What does a plot of probability distribution of outcomes show a decision maker about an assets
risk - (answers)- Probability: The chance that a given out-come will occur.
- A second and much more sophisticated way of coping with uncertainty in the cash budget is
simulation. By simulating the occurrence of sales and other uncertain events, the firm can
develop a probability distribution of its ending cash flows for each month. The financial decision
maker can then use the probability distribution to determine the amount of financing needed to
protect the firm adequately against a cash shortage.
what relationship exist between the size of the standard deviation and the degree of asset risk? -
(answers)- An asset with a high standard deviation has returns that fluctuate more (higher risk)
than does an asset with a low standard deviation.
- This means that assets with higher standard 你是想要一篇“眼睛容易阅读
deviations are more risky than assets with low
standard deviations. 的”中文文章
* Investments with higher returns have higher standard deviations
what does the coefficient of variation reveal about an investment risk that the standard deviation
does not? - (answers)- Coefficient of variation: the coefficient of variation, also known as
relative standard deviation, is a standardized measure of dispersion of a probability distribution
or frequency distribution.
- The coefficient of variation indicates how volatile an asset's returns are relative to its average or
expected return. Therefore, the coefficient of variation is a better basis than the standard
deviation for comparing risk of assets with differing expected returns.
- A higher coefficient of variation means that an investment has more volatility relative to its
expected return.
- The coefficient of variation, CV, is a measure of relative dispersion that is useful in comparing
the risks of assets with differing expected returns
