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problem1. Because of differences in expected returns on different investments, the standard deviation is not always the adequate measure of risk. But, the coefficient of the variation adjusts for differences in expected returns and hence permits investors to make better comparisons of investments' stand-alone risk true or false? Also give the reason.

problem2. When the price of money (e.g., interest rates and equity capital costs) rises due to a raise in anticipated inflation, the risk-free rate will also increase. If there is no change in investors' risk aversion, then the market risk premium (rM? rRF) will remain stable. Also, if there is no change in stocks' betas, then the required rate of the return on each stock as measured by the CAPM will raise by the same amount as the raise in expected inflation true or false? Also give the reason.

Financial Accounting, Accounting

  • Category:- Financial Accounting
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