The Expected Rate of Return for 3COM Is 18 Percent

question 117

Multiple Choice

The expected rate of return for 3COM is 18 percent, with a standard deviation of 10.98 percent. The expected rate of return for Just the Fax is 26 percent with a standard deviation of 15.86%. Which firm would be considered the riskier from a total risk perspective?

• A)3COM
• B)Just the Fax
• C)Neither, both have the same risk in a relative sense.
• D)Cannot be determined

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Definitions:

Internal Reports

Financial and operational reports that are prepared for exclusive use within the company, not for external stakeholders.

Communicated

The process of conveying information, ideas, or feelings from one entity to another, using various mediums and channels.

Managerial Accounting

The field of accounting that focuses on providing information to managers for use in planning, controlling, and making decisions.

Service Entities

Organizations that primarily provide intangible products or services to customers or other businesses.