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Finance Homework Introduction to Finance

Week 7 Melicher / Norton

14th Edition / 2011

Chapter 12: P1, P2, P3, and P4

P1. From the information below, compute the average annual return, the variance, standard deviation, and coefficient of variation for each asset.

ASSET ANNUAL RETURNS

A) 5%, 10%, 15%, 4%

B) -6%, 20%, 2%, -5%, 10%

C) 12%, 15%, 17%

D) 10%, -10%, 20%, -15%, 8%, -7%

P2. Base upon your answers to question 1, which asset appears riskiest based on standard deviation? Based on coefficient of variation?

Finance

Which of the following statements is most correct? (Points : 1)

If annual compounding is used, the effective annual rate equals the simple rate.

If annual compounding is used, the effective annual rate equals the periodic rate.

If a loan has a 12 percent simple rate with semiannual compounding, its effective annual rate is equal to 11.66 percent.

Both the first and second answers are correct.

Both the first and third answers are correct.

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