Question
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
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 | 0.2 | (30%) |
Below average | 0.3 | (11) |
Average | 0.3 | 11 |
Above average | 0.1 | 28 |
Strong | 0.1 | 66 |
1.0 |
Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places.
Stock's expected return:
Standard deviation:
Coefficient of variation:
Sharpe ratio:
B.
Stocks A and B have the following probability distributions of expected future returns:
Probability | A | B |
0.2 | (8%) | (23%) |
0.2 | 5 | 0 |
0.2 | 13 | 22 |
0.1 | 23 | 30 |
0.3 | 39 | 41 |
Calculate the expected rate of return, , for Stock B ( = 16.00%.) Do not round intermediate calculations. Round your answer to two decimal places. %
Calculate the standard deviation of expected returns, A, for Stock A (B = 23.85%.) Do not round intermediate calculations. Round your answer to two decimal places.
Now calculate the coefficient of variation for Stock B. Round your answer to two decimal places.
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