Instruction:Please answer the following questions in 2 pages, you can supplement your answers with...

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Instruction:Please answer the following questions in 2 pages, you can supplement your answers with an article from the net but you need to provide the reference, No plagiarism everything needs to be in your own words.Questions:Return and risk are the two most important factors to consider when making investment decisions. They are positively related: in order to get higher returns (potential of higher returns), one needs to bear additional risks. However, there is no garanttee that you will have a higher return when taking on higher risk. We have discussed different methods that return and risk can be quantified. Below is the list of suggested topics for our discussion. Please feel free to extend to other related areas as we go along.1. What is the difference between realized return and expected return? How each can be calculated? How to use these measures in personal investment decisions?2. How can we compute risks on historical returns? How can we get risks for expected returns?3. What is the relationship between risk and return historically? What implications does it have on your investment decisions?4. Observe the stock market performance lately, what lessons can we learn? What's your personal opinion on investing in today's market?5. Why corporate financial managers should be concerned about their company's stock price performance?
	
Document Preview: Instruction:Please answer the following questions in 2 pages, you can supplement your answers with an  article from the net but you need to provide the reference, No plagiarism everything needs to be in your own words. Questions:Return and risk are the two most important factors to consider when making investment decisions. They are positively related: in order to get higher returns (potential of higher returns), one needs to bear additional risks. However, there is no garanttee that you will have a higher return when taking on higher risk. We have discussed different methods that return and risk can be quantified. Below is the list of suggested topics for our discussion. Please feel free to extend to other related areas as we go along.1. What is the difference between realized return and expected return? How each can be calculated?  How to use these measures in personal investment decisions?2. How can we compute risks on historical returns? How can we get risks for expected returns?3. What is the relationship between risk and return historically? What implications does it have on your investment decisions?4. Observe the stock market performance lately, what lessons can we learn? What's your personal opinion on investing in today's market?5. Why corporate financial managers should be concerned about their company's stock price performance?

David · Accepted Answer

1 
 
Running Head: FINANCIAL MANAGEMENT
Financial Management   
2 
 
1. What is the difference between realized return and expected return? How each 
can be calculated?  How to use these measures in personal investment 
decisions? 
Answer: Realized return can be said to be as that return which is actually earned by an 
investor on the purchase of an asset. Realized in simple terms can be said to be as the 
cash in hand (Ilmanen, 2011).  
Expected return can be said to be as that return, which the investors expect to 
realize if an investment has been done. The expectation is highly based on the return of 
the risk free security like the U.S Treasury bond, along with a risk premium, under this 
conditions the higher the expected return the higher the risk (Ilmanen, 2011).      
Formula of Expected Return:  
Expected Return Formula = Risk-free Return + Risk Premium  
= Rf + β [E(Rm) - Rf] 
Formula of Realized return:  
Realized Return Formula= Realized Gain/Cost of investment x 100 
 In personal investment decision both the concept help very much. By the use of 
expected return investment decisions can be taken and looking at the realized return,

Instruction: Please answer the following questions in 2 pages, you can supplement your answers with an article from the net but you need to provide the reference, No plagiarism everything needs to be...

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