FINANCIAL ANALYSIS

Financial Analysis

[Name of the Institute]

Financial Analysis

Question # 1

Expected Return

The expected return in the amount that investor anticipates on the investment that has several known or the expected rates of return. In the field of investment the excepted return plays a significant role for each and every topic. Therefore, the expected return is basically the sum of the each possible outcome which is actually multiplied by the probability. For the investment the expected return is calculated using the past data usually. It is basically the one point on the spectrum for the possible returns, and therefore, it is enough that with the high risk for the investment over the short period of time, the investors don't expected to earn the expected returns over anything specifically close to it (Reilly, 2011).

The phenomenon of the risk and the return is basically positively correlated and it is one of the basic tenets of finance. It is general that the investment with the high risk is going to earn the great return as compared to the low risk investment over the particular period of time, as the period is longer the value will also be close to the expected return. For the short period of time the expected return is basically unpredictable usually yet for the longer periods of time the adjusted inflation stock returns tends to close in around a small range of the values. Therefore, if the period is longer then the risk on the investment will also be higher on the investment and it will outperform the lower risk investment (Michalski, 2013).

There are two ways on the basis of which the expected return immediately trips the investors, these are as follows.

In the first place it has been estimated poorly about the probability of the outcome

If the expected return is calculated correctly then there can be dramatic outcome for various from the expected return and it can occur still (Archibald, 2013).

The most important thing about the expected return is that it becomes more and more likely for the longer period of time and therefore, it does not matter how fancy the calculations there is no way to truly calculate the probability for the specific outcome given. Therefore the expected return plays a significant role in the investment, as the time period is higher than it can affect the investment heavily on the other hand if the time period is lower and expected return is calculated correctly then there will be dramatic outcomes. The expected return is actually the return that investor perceive that he or she will get for the specific period of time over the investment.

Standard Deviation

The standard deviation is basically the statistical measurement for measuring the variation because it is the form of the arithmetic mean, however from the investment point of view it describes the volatility of the past mutual fund return. From the investors point of view the holding of investors for various mutual funds or the shares the average standard deviation of the portfolio in order ...