question archive 35)State which of the following statements is false? Ans:1)The coefficient of variation is a better measure of risk than the standard deviation if the expected returns of the securities being compared differ significantly 2)Managers cannot act in the best interest of their shareholders unless they know their shareholder's average time preference for receiving their money and what risks a typical shareholder prepared to assume 3)Companies should deliberately increase their risk relative to the market only if the actions that increase the risk also increase the expected rate of return on the firm's assets by enough to completely compensate for the higher risk 4)If the expected rate of return for a particular investment, as seen by the marginal investor, exceeds its required rate of return, we should soon observe an increase in demand for the investment , and the price will likely increase until a price establish
35)State which of the following statements is false? Ans:1)The coefficient of variation is a better measure of risk than the standard deviation if the expected returns of the securities being compared differ significantly 2)Managers cannot act in the best interest of their shareholders unless they know their shareholder's average time preference for receiving their money and what risks a typical shareholder prepared to assume 3)Companies should deliberately increase their risk relative to the market only if the actions that increase the risk also increase the expected rate of return on the firm's assets by enough to completely compensate for the higher risk 4)If the expected rate of return for a particular investment, as seen by the marginal investor, exceeds its required rate of return, we should soon observe an increase in demand for the investment , and the price will likely increase until a price establish
Subject:FinancePrice:2.84 Bought7
35)State which of the following statements is false?
Ans:1)The coefficient of variation is a better measure of risk than the standard deviation if the expected returns of the securities being compared differ significantly
2)Managers cannot act in the best interest of their shareholders unless they know their shareholder's average time preference for receiving their money and what risks a typical shareholder prepared to assume
3)Companies should deliberately increase their risk relative to the market only if the actions that increase the risk also increase the expected rate of return on the firm's assets by enough to completely compensate for the higher risk
4)If the expected rate of return for a particular investment, as seen by the marginal investor, exceeds its required rate of return, we should soon observe an increase in demand for the investment , and the price will likely increase until a price establish
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
1) True
2) True
3) True
4) True
Step-by-step explanation
1) The coefficient of variation is a better measure of risk than the standard deviation if the expected returns of the securities being compared differ significantly (True)
Explanation: Coefficient of variation calculates the Standard deviation value per Mean return and the formula is : Standard deviation / Mean return. Therefore, it is better to measure the risk through coefficient of variation for better comparison .
2) Managers cannot act in the best interest of their shareholders unless they know their shareholder's average time preference for receiving their money and what risks a typical shareholder prepared to assume. (True)
Explanation: Manager, need to understand the shareholders average time preference, so that they can plan the business process accordingly to fulfill the required expectation.
3) Companies should deliberately increase their risk relative to the market only if the actions that increase the risk also increase the expected rate of return on the firm's assets by enough to completely compensate for the higher risk. (True)
Explanation: Companies should increase the risks only if there are considerable higher opportunities of profit, otherwise no reason to take high risk without any high return possibility.
4) If the expected rate of return for a particular investment, as seen by the marginal investor, exceeds its required rate of return, we should soon observe an increase in demand for the investment , and the price will likely increase until a price establish. (True)
Explanation: When the market expectation are towards the higher returns in compare to the required rate of return, then in such case, the investors tend to buy those investments to increase their return and as a result the rate of such investments goes high.
