Questions from General Investment

Q: Describe the steps involved in the investment decision process. Be sure

Describe the steps involved in the investment decision process. Be sure to mention how returns and risks can be evaluated together to determine acceptable investments.

Q: What role do historical performance data play in estimating an investment’s expected

What role do historical performance data play in estimating an investment’s expected return? Discuss the key factors affecting investment returns—internal characteristics and external forces.

Q: What is a satisfactory investment? When the present value of benefits

What is a satisfactory investment? When the present value of benefits exceeds the cost of an investment, what can you conclude about the rate of return earned by the investor relative to the discount...

Q: Define the following terms and explain how they are used to find

Define the following terms and explain how they are used to find the risk-free rate of return and the required rate of return for a given investment. a. Real rate of return b. Expected inflation premi...

Q: What is meant by the holding period, and why is it

What is meant by the holding period, and why is it advisable to use holding periods of equal length when comparing alternative investments? Define holding period return, and explain for what length ho...

Q: If you place a stop-loss order to sell at $

If you place a stop-loss order to sell at $52 on a stock currently selling for $55.50 per share, what is likely to be the minimum loss you will experience on 100 shares if the stock price rapidly decl...

Q: Define internal rate of return. When is it appropriate to use

Define internal rate of return. When is it appropriate to use IRR rather than the HPR to measure the return on an investment?

Q: Explain how either the present value (of benefits versus cost)

Explain how either the present value (of benefits versus cost) or the IRR measure can be used to find a satisfactory investment. Given the following data, indicate which, if any, of these investments...

Q: Define risk. Explain what we mean by the risk-return

Define risk. Explain what we mean by the risk-return tradeoff. What happens to the required return as risk increases? Explain.

Q: Define and briefly discuss each of the following sources of risk.

Define and briefly discuss each of the following sources of risk. a. Business risk b. Financial risk c. Purchasing power risk d. Interest rate risk e. Liquidity risk f. Tax risk g. Event risk h. Ma...