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As a stock investor would you rather invest in a stock with a larger or smaller

ID: 3124673 • Letter: A

Question

As a stock investor would you rather invest in a stock with a larger or smaller range; why? Secondly, give an example where inter-quartile ranges are used. Each student must complete two separate threads in response to the week's discussion. Each thread post must be 5 or more sentences Answer the week's thread question as it applies to the news video (worth 5 points per week) Respond to another student s posting related to the video (worth 5 points per week). Must identify which thread post you are responding to!! Confirm or contradict an assertion made from a classmates post and explain why.

Explanation / Answer

The range depends on the type of security; and for a stock, the sector in which it operates. For example, the range for fixed-income instruments is much tighter than that for commodities and equities, which are more volatile in price. Since price volatility is equivalent to risk, a security’s trading range is a good indicator of risk. A conservative investor will prefer a security with smaller price fluctuations compared with a security that is susceptible to big gyrations.

The interquartile range is a measure of where the “middle fifty” is in a data set. Where a range is a measure of where the beginning and end are in a set, an interquartile range is a measure of where the bulk of the values lie. That’s why it’s preferred over many other measures of spread (i.e. the average or median) when reporting things like school performance or SAT scores.

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