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Attempts: Keep the Highest: /4 Attention: Due to a bug in Google Chrome,this page may not function correctly. Cick here to learn more. 2. Measuring standalone risk using realized data Returms earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results, Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Celestial Crane Cosmetics Inc. (coc Five years of realized returns for CCC are given in the folowing table. Remember: 1. While CCC was started 40 years ago, its common stook has been publidy traded for the past 25 years. 2. The returns on its equity are calculated as arthmetic returns. 3. The historical returns for Cac for 2012 to 2015 are: 2012 2013 2014 2015 2016 Stock return 3.75% 2.55% 4.50% 6.30% 1.95% Given the preceding data, the average realized return on CCC's stock is of coc's historical returns. Based on this conclusion, the The preceding data series represents standard deviation of CCC's historical If investors expect the average realized return from 2012 to 2016 on ccC's stock to continue Into the future, ts coefficient of variation (CV] will beExplanation / Answer
The average realized return on CCC stock from 2012 tp 2016 is= (Total realized return/number of years)=(3.75+2.55+4.5+6.3+1.95)/5=3.81%
The preceding data series represents standalone risk of CCC's historical return.Based on this conslusion, the standard deviation of CCC's historical return is = square root ((3.75-3.81)^2+(2.55-3.81)^2+(4.5-3.81)^2+(6.3-3.81)^2+(1.95-3.81)^2)/5= 1.712%
The coeffecient of variation= (standard deviation/average)*100= 1.712/3.81= 44.94%
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