Question
2. Quantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Probability Rate of return Strong 0.25 22% Normal 0.5
2. Quantitative Problem: You are given the following probability distribution for CHC Enterprises:
State of Economy | Probability | Rate of return |
Strong | 0.25 | 22% |
Normal | 0.5 | 9% |
Weak | 0.25 | -6% |
- What is the stock's standard deviation? Round your answer to two decimal places. Do not round intermediate calculations. _____%
- What is the stock's coefficient of variation? Round your answer to two decimal places. Do not round intermediate calculations. ______
5.
A stock's returns have the following distribution:
Demand for the Company's Products | Probability of This Demand Occurring | Rate of Return If This Demand Occurs |
Weak | 0.1 | (20%) |
Below average | 0.2 | (14) |
Average | 0.3 | 15 |
Above average | 0.1 | 22 |
Strong | 0.3 | 70 |
1.0 |
- Calculate the stock's coefficient of variation. Round your answer to two decimal places.
6. A stock has a required return of 9%; the risk-free rate is 4.5%; and the market risk premium is 4%.
- New stock's required rate of return will be ____%. Round your answer to two decimal places.
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