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The Meaning and Measurement of Risk and Return (Example)

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Students Name Institutional affiliation MODULE 7 CT PROBLEMS Date MODULE 7 CT PROBLEMS THE MEANING AND MEASUREMENT OF RISK AND RETURN         CT 7 - 1 Chapter 6 STANDARD DEVIATION Given the following probabilities and returns for UAE Corporation find the standard deviation. DATA PROBABILITY RETURNS 0.23 7% 0.27 9% 0.10 14% 0.40 13% Solution Expected return = (0.23*0.07) + (0.27*0.09) + (0.10*0.14) + (0.40*0.13) = 0.1064 Variance of return is given by Var (X) = (0.1064-(0.23)²)*0.07) + (0.1064-(0.27)²*0.09) + (0.1064-(0.10)² *0.14) + (0.1064-(0.40)²*0.13) Var (X) = 0.013288 Standard deviation = √0.013288 =0.1152736 CT 7 - 2 Chapter 6 HOLDING PERIOD GAIN AND RETURN Suppose you purchased 18 shares of UAE Corporation stock for SAR 25.65 per share 2145000-1425000=SAR 720 000 Operating income = 2 145 000-225 000-1 425 000= SAR 495 000 Operating leverage= contribution margin/operating income = 720 000/495 000= 1.454 Sales will increase to 3510 Units Sales volume =3510* 715 =SAR 2 509 650 Fixed costs =SAR 225 000 Variable costs = SAR 1 667 250 Operating income = SAR 2 509 650- SAR 225 000- SAR 1 667 250 = SAR 617400 SALES INCREASE =617 400-495 000=SAR 122 400 References Annualized Holding-Period Return. (n.d.). SpringerReference. Breakeven Point. (n.d.). SpringerReference. Guerard  J. (2016). The Theory of Risk Return and Performance Measurement. Portfolio Construction Measurement and Efficiency 1-38. Operating Leverage. (n.d.). Encyclopedia of Finance 196-196 Stahl  R. (2015). Kritische Analyse des Capital Asset Pricing Model. Capital Asset Pricing Model und Alternativkalküle 13-24. [...]

Order Description:

Complete the following problems: Problem 7-1: Standard Deviation Problem 7-2: Holding-Period Gain and Return Problem 7-3: Capital Asset Pricing Model Problem 7-4: Breakeven Point and Selling Price Problem 7-5: Operating Leverage You can access the problem details by clicking on The Meaning and Measurement of Risk and Return link below. Complete the problems in an Excel spreadsheet or Word document. Be sure to show your work.

Subject Area: Finance

Document Type: Proofreading

This project has already been completed by one of the Studybay experts. The client rated this project:

Project's rating is 5/5

Price $25

Words 275

Pages 1

Completed in 2 days

Expert Edna7

Client Review

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Positive
03.07.2018

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