How much risk is worth it?
Measure return and risk from history and from scenarios, see how an investor's risk aversion scores them, then mix a risky asset with a safe one and find the best split on the capital allocation line.
Riskier assets grew more, and swung more
Riskier assets grew more, and swung more
| Average year | SD | Worst year | $1 grew to | |
|---|---|---|---|---|
| Small stocks | 14.9% | 29.2% | −42.3% | $64.57 |
| Large stocks | 8.7% | 16.6% | −26.2% | $17.30 |
| Government bonds | 6.0% | 6.8% | −8.2% | $9.32 |
| T-bills | 3.6% | 1.1% | 1.1% | $4.14 |
Six months of two stocks: risk, Sharpe ratios and which one to hold
- Find each stock's average monthly return.
- Find each stock's deviations from its average, its variance and its standard deviation (divide by n).
- What would Excel's STDEV.S give for FVF?
- Which stock is riskier?
- Find each stock's Sharpe ratio.
- Leila will hold only one of the two stocks, mixed with T-bills, and she may borrow at the T-bill rate. Which stock should she pick, and what monthly expected return could it give her at the riskier stock's level of risk?
| HLT | FVF | |
|---|---|---|
| Month 1 | 6% | 2.20% |
| Month 2 | −4.50% | 0.40% |
| Month 3 | 9% | 3% |
| Month 4 | 1.50% | 1.10% |
| Month 5 | −3% | −0.50% |
| Month 6 | 6.60% | 2.80% |
Exam coming up and w* still feels slippery?
Bring your problem sets. We work through them together until every type feels routine.
Questions, answered.
Still unsure about something? Message us and you will hear back within a day.
See all questionsIn person, we meet at the SFU Burnaby campus or in a private meeting room near Brentwood in Burnaby. Online sessions run on Zoom. You choose when you book.
Create a free account, pick your course and a time, and send the request. We review it and confirm by email within 24 hours. The email has your time and place, or your Zoom link for online sessions.
After the session. Nothing is charged when you book.
Tell us within 24 hours and you get a full refund. No forms, no arguing.
Yes, and it is free. Open your account page and choose "Change time or notes" or "Cancel session", or message us on WhatsApp.
SFU Beedie accounting, finance, statistics and economics courses. The full list is on the Courses page. If yours is missing, message us and we will tell you within a day whether we can cover it.
Yes. Two or more students taking the same course can book together and each pays less per hour. Exam prep packages are also available before midterms and finals.
Yes. After each session you get an email report with what was covered, what to practise next and any files from the session. You can re-read them on your account page.