It is known: the historical return of security A is 5%; 8.5% and 10%historical return from the market is 2%; 3% and 4%Beta of security A is ..... and security A .....

RISK AND RETURN

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

It is known: the historical return of security A is 5%; 8.5% and 10%historical return from the market is 2%; 3% and 4%Beta of security A is ____ and security A ____

A	1, 7; not risky
B	2; risky
C	0.5; risky
D	2, 5; risky

Explanation:

Detailed explanation-1: -Calculating the historical return is done by subtracting the most recent price from the oldest price and divide the result by the oldest price.

Detailed explanation-2: -The rate of return is expressed as a percentage of the total amount you invested. If you invest $1, 000 and get back your original investment plus an additional $100 in interest, you’ve earned a 10 percent return.

Detailed explanation-3: -Expected return = (Return A x probability A) + (Return B x probability B) Expected return is just one of many potential returns since the investment market is highly volatile. You can calculate expected return as a weighted average outcome since it accounts for the investment’s historical performance.

Detailed explanation-4: -Expected Return Beta Relationship A security with a beta of 1 has the same expected return as the overall market, whereas a stock with a beta of less than one is considered more conservative.

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ECONOMICS (CBSE/UGC NET)

ECONOMICS

RISK AND RETURN