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Risk and Return

1. Training and development can have a positive impact on employees by improving their skills and abilities to perform their jobs better. It allows employees to learn new skills that help them advance in their careers. 2. When employees feel supported through ongoing training, it often leads to higher job satisfaction and morale. They feel valued by their employer for making an investment in their professional growth. 3. Regular training and development programs can help reduce employee turnover by giving staff new opportunities to take on more interesting or advanced roles within the company. Employees are less likely to seek opportunities elsewhere if they feel they are continuing to learn and progress in their current job. 4

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121 views

Risk and Return

1. Training and development can have a positive impact on employees by improving their skills and abilities to perform their jobs better. It allows employees to learn new skills that help them advance in their careers. 2. When employees feel supported through ongoing training, it often leads to higher job satisfaction and morale. They feel valued by their employer for making an investment in their professional growth. 3. Regular training and development programs can help reduce employee turnover by giving staff new opportunities to take on more interesting or advanced roles within the company. Employees are less likely to seek opportunities elsewhere if they feel they are continuing to learn and progress in their current job. 4

Uploaded by

rudrakshi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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1. You buy Cisco stock for $50 a share. Cisco’s stock rises to $100 the next year.

The
following year, Cisco’s stock falls back to $50 a share.
A. What was your arithmetic return over the two years?
B. What was your geometric return over the two years?

2. You are given the following estimates for Stock’s A and B.


State of Economy Probability A B
Poor 0.25 -5% -8%
Normal 0.5 8% 10%
Good 0.25 12% 22%
A. What are the expected returns for stock’s A and B respectively?
B. What are the standard deviations for stock’s A and B respectively?
C. Which stock is riskier?
D. Approximately two thirds of the time, the returns for A and B should be within what
ranges respectively?

3. You have decided to invest 40% of your wealth in McDonalds which has an expected
return of 15% and a standard deviation of 15%, and 60% of your wealth in GE which has an
expected return of 9% and a standard deviation of 14%.
a. What is the expected return of your portfolio?
b. If the correlation between McDonalds and GM is 0.5, what is the standard deviation of
your portfolio?
c. If you wanted an expected return of 13%, what percentage should you invest in
McDonalds?
d. Based on your percentages in part c, what would the standard deviation of this portfolio
be?

4. The table below gives the amount invested and betas for three stocks.
Stock Amount Invested Beta
GM $10,000 1.0
IBM $10,000 1.2
WMT $20,000 0.7

a. Using the CAPM, if the expected return for the market is 9% and the risk-free rate is 3%,
what is the expected return for each stock?
b. What is the beta for this portfolio based on the invested amounts?
c. Using the CAPM, what is the expected return for this portfolio?

The annual rate of return for JSI’s common stock has been:
1989 1990 1991 1992
Return 14% 19% -10% 14%

CFA
1. What is the arithmetic mean of the rate of return for JSI’s common stock over the four
years?
a. 8.62%
b. 9.25%
c. 14.25%
d. None of the above
CFA
2. What is the geometric mean of the rate of return for JSI’s common stock over the four
years?
a. 8.62%
b. 9.25%
c. 14.21%
d. Cannot be calculated due to the negative return in 1991

CFA
3. An analyst estimates that a stock has the following probabilities of return depending on
the state of the economy:
State of Economy Probability Return
Good 0.1 15%
Normal 0.6 13%
Poor 0.3 7%
The expected return of the stock is:
a. 7.8%
b. 11.4%
c. 11.7%
d. 13.0%

CFA
Use the following expectations on Stocks X and Y to answer the following three questions
Bear
Market Normal Market Bull Market
Probability 0.2 0.5 0.3
Stock X -20% 18% 50%
Stock Y -15% 20% 10%

CFA
4. What are the expected returns for Stocks X and Y?
Stock X Stock Y
a. 18% 5%
b. 18% 12%
c. 20% 11%
d. 20% 10%

CFA
5. What are the standard deviations of returns on Stocks X and Y?
Stock X Stock Y
a. 15% 26%
b. 20% 4%
c. 24% 13%
d. 28% 8%

CFA
6. Assume that of your $10,000 portfolio, you invest $9,000 in Stock X and $1,000 in Stock
Y. What is the expected return on your portfolio?
a. 18%
b. 19%
c. 20%
d. 23%

questionnaire on training and development:

what is the impact of training and development on your employees?

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