Audit Risk/Investment Risk

Stand- Alone Risk

 Stand Alone Risk
Key Items:

1. Probability Distributions
2. Expected Return
3. Standard Deviations
4. Coefficient of Variance
 Formula:

OR

= Probability Rate X Actual Rate

Compute:
 Expected Return

OR= Probability Rate X Actual Rate

Standard Deviation:

Variance = (Actual % - Expected Return)^2 X Probability Ra

HT = (-27% -12.4%)^2 X .10
= .0155236 Recession Variance

Do the same process with the below average, averag

Above average and booming economy.
The total Variance is = 0.040144

Square root of 0.040144 = 20%

Expected Return
Cont.. Std Deviation
(Answers)
 Coefficient of Variance

HT = 20% / 12.4% = 1.6

And do the rest with T-bills,

Collections, US Rubber and Market.