8.2

The coefficient of variation is a better measure of stand-alone risk than standard deviation because it is a standardized measure of risk per unit; it is calculated as the -Select- divided by the expected return. The coefficient of variation shows the risk per unit of return, so it provides a more meaningful risk measure when the expected returns on two alternatives are not -Select- .. The Sharpe ratio compares the asset's realized excess return to its -Select- over a specified period. Excess returns measure the amount that investment returns are above the risk-free rate so investments with returns equal to the risk-free rate will have a -Select- Sharpe ratio. It follows that over a given time period, investments with -Select- Sharpe ratios performed better, because they generated higher -Select- excess returns per unit of risk. The Sharpe ratio is calculated as: Sharpe ratio = (Return - Risk-free rate)/ Quantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Probability. Rate of return Strong Normal Weak 0.15 0.50 0.35 19% 10% -6% What is the stock's expected return? Do not round intermediate calculations. Round your answer to two decimal places. What is the stock's standard deviation? Do not round intermediate calculations. Round your answer to two decimal places. What is the stock's coefficient of variation? Do not round intermediate calculations. Round your answer to two decimal places