Description
As a financial advisor, you are assigned a new client who is considering investing in one of two stocks, A or B.
The table below shows information about the performance of stocks A and B last year.
Return | Standard Deviation | |
Stock A | 15 % | 8.3% |
Stock B | 14% | 2.1% |
- As a financial advisor, are there factors other than return and risk that should be considered in making this decision?
- Based on these factors, what stock would you recommend to the client?
- What reasons will you convey to your client to justify your decision in recommending this stock?
- How will this recommendation impact the client?
Specifically, the following critical elements must be addressed;
Main Elements
Integration and Application
Analysis
Critical Thinking
Guidelines for Submission: your analysis of the scenario must be submitted as a 1-2 page Microsoft work document with double spacing and 12 point times new roman font.
Explanation & Answer
Attached.
1
Factors affecting stock prices
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Factors affecting stock prices
Different factors affect the expected return of stocks. The factors are as outlined below.
Interest Rate
There is an inverse proportion between the interest rates and the prices of securities. Investors
like to invest in stocks that have a high rate of return (Flannery & James, 1984, p. 1149). Any
rise in interest rate leads to...
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