The primary problem with volatility is that it is unobservable; it is the only input into the option pricing formula that is determined subjectively by the trader pricing the option
Indicate whether the statement is true or false.
Answer: TRUE
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The goal of the vendor audit is to evaluate potential suppliers in terms of cost and quality of merchandise
Indicate whether the statement is true or false
Consider four investments, where risk is measured by the standard deviation. The investments are identical in every way except for their expected return and risk: Investment A:expected return = 2 percent, risk = 5 percentInvestment B:expected return = 5 percent, risk = 4 percentInvestment C:expected return = 14 percent, risk = 20 percentInvestment Dexpected return = 6 percent, risk = 12 percent ? If a risk-averse investor can buy only one of the four investments and compares each investment with the other three, which investment option would he never choose?
A. Investment A, because its expected return is lower than Investment B and its risk is higher. B. Investment B, because its expected return is so much lower than Investment C. C. Investment C, because its risk exceeds its expected return. D. Investments D, because the expected return to investment D is so much lower than Investment C.
Sales for January are budgeted at 50,000 units, and the company expects sales to increase 4% each month. How many units will need to be purchased in February if the company's policy is to keep ending inventory each month at 10,000 units?
A. 54,000 units B. 62,000 units C. 52,000 units D. None of the choices is correct.
Which of the following best describes the term "sensitivity analysis"?
A) It is a testing technique to determine how results would differ if key assumptions are changed. B) It is an analysis of the emotional sensitivity of a company's employees. C) It is an evaluation of the accuracy of the assumptions. D) It evaluates a company's financial condition by doing financial statement analysis.