Risk and Return

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Focus on risk and reward valuations.

In this assessment, you will explore different measures and sources of risk and how to manage it, portfolio theories, the capital asset pricing model (CAPM), and the efficient market hypothesis (EMH). Other areas of consideration include stand-alone risk versus portfolio risk, risk sources and their measure, as well as portfolio efficiencies.

Introduction

This assessment focuses on risk and reward valuations.

Instructions

Complete and submit the Assessment 4 Template [XLSX].

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria:

Competency 1: Analyze financial environments and concepts.

Describe why expected return is considered forward-looking.

Competency 2: Apply financial computations and processes.

Perform five risk and reward calculations correctly.

Competency 3: Communicate effectively and professionally.

Convey clear meaning through appropriate word choice and usage.

Focus on risk and reward valuations.

In this assessment, you will explore different measures and sources of risk and how to manage it, portfolio theories, the capital asset pricing model (CAPM), and the efficient market hypothesis (EMH). Other areas of consideration include stand-alone risk versus portfolio risk, risk sources and their measure, as well as portfolio efficiencies.

Introduction

This assessment focuses on risk and reward valuations.

Instructions

Complete and submit the Assessment 4 Template [XLSX].

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria:

Competency 1: Analyze financial environments and concepts.

Describe why expected return is considered forward-looking.

Competency 2: Apply financial computations and processes.

Perform five risk and reward calculations correctly.

Competency 3: Communicate effectively and professionally.

Convey clear meaning through appropriate word choice and usage.

 

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Risk & Return

BUS-FPX3062 Assessment 4 Template
Risk and return
Solve the following problems and answer the last question. Create appropriate formulas using the supplied values in the corresponding cells so Excel can calculate the answer.
Calculations
1. FedEx Corp stock ended the previous year at $103.39 per share. It paid a $0.35 per share dividend last year. It ended last year at $106.69. If you owned 200 shares of FedEx, what was your dollar return and percent return? [Answer here]
2. Rank the following three stocks by their level of total risk, highest to lowest. Rail Haul has an average return of 12 percent and standard deviation of 25 percent. The average return and standard deviation of Idol Staff are 15% and 35%; and of Poker-R-Us are 9 percent and 20 percent. Before solving this problem, calculate the coefficient of variation. [Answer here]
3. Year-to-date, Oracle had earned a −1.34% return. During the same time period, Valero Energy earned 7.96% and McDonald’s earned 0.88%. If you have a portfolio made up of 30 percent Oracle, 25% Valero Energy, and 45 percent McDonald’s, what is your portfolio return?” [Answer here]
4. Hastings Entertainment has a beta of 0.65. If the market return is expected to be 11% and the risk-free rate is 4%, what is Hastings’ required return? Use the capital asset pricing model. [Answer here]
5. Determine the beta coefficient for a stock with a return of 10%, risk free rate of 3% and the market return of 9%. [Answer here]
Question
6. Describe why expected return is considered ‘forward-looking’? [Answer here]
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