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3c. How can the risk of an asset be different when the asset is held by itself versus when it is held as a part
3c. How can the risk of an asset be different when the asset is held by itself versus when it is held as a part of a group, or portfolio, of assets? (page 275 and critical thinking) |
6b. Calculate the coefficient of variation for a stock with the following information. (page 281) | |||||||
Average return | 14.4% | ||||||
Standard Deviation | 12.52% | ||||||
Coefficient of variation | 0.87 | (Solution: 0.87) | |||||
6c. If the coefficient of variation for another stock is 0.61, which stock would be more attractive to investors who are risk-averse? Explain. (critical thinking) | |||||||
7b. Given that the risk-free rate is 3%, use information from 6b to calculate the Sharpe ratio for that stock. (page 281) | |||||||
Risk-free rate | 3% | ||||||
Sharpe ratio | (Solution: 0.91) | ||||||
7c. If the Sharpe ratio of another stock is 1.45, which stock is likely to be more appealing to risk-averse investors? (page 281) | |||||||
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