1. An asset is forecast to have a return of 30% with a probability of .5...

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Finance

1. An asset is forecast to have a return of 30% with aprobability of .5 (50%) and a return of 10% with a probability of.5 (50%). The expected return is 20%. What is the variance of thereturns?
a) 0
b) none of these
c) 0.1
d) 0.01
2. An asset has a variance of .0009. The standarddeviation of the asset is:
a) 0
b) 0.3
c) 0.003
d) 0.03
3. Which of the following would typically be consideredas an unsystematic risk factor?
a) a major product of the firm, accounting for 80% of its sales,is found to be unsafe and may no longer be sold
b) gross domestic product is forecast to grow more slowly thanexpected
c) the cost of petroleum is expected to increasesignificantly
d) the federal government increase corporate tax rates by 20percentage points
4. An asset with only one possible outcomewould
a) have a zero standard deviation
b) have no risk
c) have a zero variance
d) all of these

Answer & Explanation Solved by verified expert

3.7 Ratings (345 Votes)

1 Probability Expected Return 05 30 05 10 Expected Return ER p1R1p2R2 05300510 20 Variance can be calculated using the formula 2 p1R1 ER2 p2R2 ER2 0530202 0510202 0500105001 001 Answer 001 2 Variance 00009 We know that the standard deviation of an assets is the square root of its See Answer

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1. An asset is forecast to have a return of 30% with aprobability of .5 (50%) and a return of 10% with a probability of.5 (50%). The expected return is 20%. What is the variance of thereturns?a) 0b) none of thesec) 0.1d) 0.012. An asset has a variance of .0009. The standarddeviation of the asset is:a) 0b) 0.3c) 0.003d) 0.033. Which of the following would typically be consideredas an unsystematic risk factor?a) a major product of the firm, accounting for 80% of its sales,is found to be unsafe and may no longer be soldb) gross domestic product is forecast to grow more slowly thanexpectedc) the cost of petroleum is expected to increasesignificantlyd) the federal government increase corporate tax rates by 20percentage points4. An asset with only one possible outcomewoulda) have a zero standard deviationb) have no riskc) have a zero varianced) all of these