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Author Question: The Road Ready Riding, Inc will use an estimated 24,000 wheel assemblies in its manufacturing ... (Read 180 times)

asmith134

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on: Jul 10, 2018
The Road Ready Riding, Inc will use an estimated 24,000 wheel assemblies in its manufacturing
  process next year. The carrying cost of the wheel assembly inventory is 1.80 per wheel and the
  ordering cost per order is 50.
 
  What is Road Ready's economic ordering quantity of wheel
  assemblies?
  A) 785 B) 997 C) 1,155 D) 1,098

Question 2

Explain the difference in the two main measures of risk: the standard deviation and the beta.
 
  What will be an ideal response?
Foundations of Finance ¦ Keown, Petty, Martin ¦ 9th Edition
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SAUXC

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Reply #1 on: Jul 10, 2018
Answer to Question 1

C

Answer to Question 2

Answer: It is best to use the standard deviation when describing the risk of an isolated stock or even a portfolio that is not well-diversified. It is best to use the beta of a stock to describe its risk when it is not isolated but is instead a part of a well-diversified portfolio. When it is mixed with other stocks, its fluctuations will cancel out some of the other stocks' fluctuations, thereby reducing the overall volatility of the portfolio. So a stock that looks risky by itself may very well make your portfolio safer, depending on its correlation with all the other stocks in your portfolio.


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