As a financial advisor, are there factors other than return and risk that should be considered in making this decision?

User Generated

ybyb82

Business Finance

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?

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Explanation & Answer

See the attached solution below. In case of anything else, kindly get back to me.

1
Student’s name
Professor name
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Investment Decisions.
Question 1: As a financial advisor, are there factors other than return and risk that should be
considered in making this decision?
When making investment decisions on stocks, there are various factors to consider. Apart from the
return and risk, investors also consider other factors. One of these factors is the risk appetite of the
investors. Each type of stock carry with it a certain level of risk as measured by the standard
deviation and variance. Ideally, different investors have different and unique levels of risk appetite.
Young investors, for example, may b...


Anonymous
I was struggling with this subject, and this helped me a ton!

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