Question

Question through 11 Each has 5 points (or course total is 50 points) Over the past 3 years, which of the following investments has provided the smallest average return? Small company stocks B) Common stocks C) Treasury bills D) Treasury bonds E) Corporate bonds A) Over the past 83 years, which of the following investments has been considered the most risky? Small company stocks B) Common stocks C) Treasury bills D) Treasury bonds E) Corporate bonds Carson Inc.'s manager believes that economic conditions during the next year will be strong, normal, or weak, and she thinks that the firm's returns will have the probability distribution shown below. What's the standard deviation of the estimated returns? (Hint: Use the formula for the standard deviation of a population, not a sample.) Economic Conditions Strong Normal Weak Prob. 30% 40% 30% Return 32.0% 10.0% -16.0% a. 17.69% b. 18.62% c. 19.55% d. 20.52% e. 21.55%

Answer 1

a). Investment in Treasury bills has provided the smallest average return. so the answer is C. Common stocks has provided the second height return.

b) corporate bonds has been considered as a most risky investments. so option E is correct. next lowest risky compared to corporate bond is Treasury bills next is Treasury bonds.

c)

from the given data Expected Rate of Returs in weight & Return (.3x32 7.) +(10x•4) + (167.3) E 9.6+4 -4.8 = B:8 Standard deviatūós vie - V 6-5) 2x pro +14-7]2 x prob +62-2)'s prob. - 82-8.8)2x03 + (10-8.8)2.4 +16-8.832.3 - 16.47 + .576+ (+184-512) 1 346.568 =18.62% Options b is correct: