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Operations Management
With reference to the information given above, 1)  Discuss the relationship between risk and return of the individual securities. 2)  Demonstrate the meaning and advantages of diversification by constructing a portfolio consisting of equal investments in the High-Tech Co. and the Counter- Cyclical Co. Explain your idea and show your work clearly. Perform calculations or quantitative analyses to support your answers where necessary.

With reference to the information given above, 1)  Discuss the relationship between risk and return of the individual securities. 2)  Demonstrate the meaning and advantages of diversification by constructing a portfolio consisting of equal investments in the High-Tech Co. and the Counter- Cyclical Co. Explain your idea and show your work clearly. Perform calculations or quantitative analyses to support your answers where necessary.

Foundations of Business (MindTap Course List)
Foundations of Business (MindTap Course List)
6th Edition
ISBN:9781337386920
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Chapter15: Using Management And Accounting Information
Section15.8B: Financial Ratios
Problem 1CC
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With reference to the information given above,

  1. 1)  Discuss the relationship between risk and return of the individual securities.

  2. 2)  Demonstrate the meaning and advantages of diversification by constructing a portfolio consisting of equal investments in the High-Tech Co. and the Counter- Cyclical Co. Explain your idea and show your work clearly.

Perform calculations or quantitative analyses to support your answers where necessary.

Expected Rate of Return Counter- Utility Treasury Bill Index Fund Company High-Tech Company Cyclical Company Scenario Recession Probability 20% 5% -10% 6% -25% 20% Near Recession 20% 5% -6% 7% -20% 16% Normal 30% 5% 12% 9% 15% 12% Near Boom 10% 5% 15% 11% 25% -9% Вoom 20% 5% 20% 14% 35% -20% Expected Return 5% 5.9% 9.2% 5% 5.9% Standard Deviation 0% 11.94% 2.82% 24.19% 15.69%
Transcribed Image Text:Expected Rate of Return Counter- Utility Treasury Bill Index Fund Company High-Tech Company Cyclical Company Scenario Recession Probability 20% 5% -10% 6% -25% 20% Near Recession 20% 5% -6% 7% -20% 16% Normal 30% 5% 12% 9% 15% 12% Near Boom 10% 5% 15% 11% 25% -9% Вoom 20% 5% 20% 14% 35% -20% Expected Return 5% 5.9% 9.2% 5% 5.9% Standard Deviation 0% 11.94% 2.82% 24.19% 15.69%
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