Mega Corporation Has the Following Returns for the Past Three

question 57

Multiple Choice

Mega Corporation has the following returns for the past three years: 7 percent, 13 percent, and 10 percent. Use the following formulas to calculate the variance of the returns and the standard deviation of the returns:
Variance (

_m) = expected value of (

_m - r_m) ²
Standard deviation of

_m =
.

• A)64.00 and 8.00 percent
• B)124.00 and 11.10 percent
• C)6.00 and 2.45 percent
• D)30.00 and 10.00 percent

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Definitions:

Complex Capital Structure

A corporate structure that features a mix of simple and complicated financial instruments, including multiple levels of debt and equity.

Convertible Bonds

Bonds issued by a corporation that can be converted into a predetermined number of shares of the company's stock at the discretion of the bondholder, usually at certain times during their life.

Stock Options

Contracts that give the holder the right, but not the obligation, to buy or sell a specified amount of stock at a predetermined price within a set time period.

Convertible Preferred Stock

A type of preferred stock that offers the holder the option to convert their shares into a predetermined number of common stock shares, usually after a specific date.