Posted by Anonymous on Monday, August 2, 2010 at 9:08pm.
Consider the following two, completely separate, economies. The expected return violatility of all stocks in both economies is the same. In the first economy, all stocks move togetherin good times all prices rise together and in bad times they all fall together. In the second economy, stock returns are independent –one stock increasing in price has no effect on the price of other stocks. Assuming you are risk –averse and you could choose one of the two economies in which to invest, which one would you choose explain.

Coporate finance  Ms. Sue, Monday, August 2, 2010 at 9:20pm
I'd invest in several stocks in the second economy. I'd be taking less risk because while some stock prices may fall, others will probably rise. The first economy is like putting all of your eggs in one basket.

Coporate finance  Anonymous, Friday, August 13, 2010 at 5:19pm
Ambrin Corp. expects to receive $2,000 per year for 10 years and $3,500 per year for the next 10 years. What is the present value of this 20 year cash flow? Use an 11% discount rate.
Answer This Question
Related Questions
 Finance  Consider the following two, completely separate, economies. Te ...
 finance  5. Consider the following stocks, all of which will pay a liquidating ...
 Finance  Calculate the return and standard deviation for the following stock, ...
 Statistics  Suppose that the percentage returns for a given year for all stocks...
 statistics  Suppose that the percentage returns for a given year for all stocks...
 Finance  21. Consider an economy with two types of firms, S and I. S firms all ...
 Finance  we have two stocks Stock A and Stock B, Both stocks have the same ...
 statistics  Suppose that the percentage returns for a given year for all stocks...
 finance  Use the capitalasset pricing model to predict the returns next year ...
 Finance  Suppose you are considering two investments, stock A and stock B. The ...
More Related Questions