True or False? The three questions are independent.
(a) “The average monthly return of Kroger Co. in 2009-10 was 0.28% (including dividends). Therefore, its
annual return was (1 + 0.28%)12 − 1 ≈ 3.4%.”
(b) “To calculate the annual volatility of a series of monthly returns I may either compute their standard
deviation and multiply it by or equivalently I may annualize each monthly return and then compute the corresponding standard deviation.”
(c) “The return of my portfolio is 15% per year and its risk is 25% per year. The stock of MeToo.Com has a 15% return and 30% risk. Hence, adding MeToo.Com to my portfolio would increase its risk but not its return.”
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