A..For EACH of the following assets in the table below, can you help me compute the following:

I. Average annual return

II. Variance

III. Standard Deviation

IV. Coefficient of variation

Comment on your general findings.

ASSETS ANNUAL RETURNS

A 5%, 10%, 15%, 4%

B -6%, 20%, 2%, -5%, 10%

C 12%, 15%, 17%

D 10%, -10%, 20%, -15%, 8%, -7%

B...Given your evaluation of current economic conditions, you believe there is a 20% probability of recession, a 50% chance of continued steady growth, and a 30% probability of inflationary growth. For each possibility, you have developed an interest rate forecast for long-term Treasury bond interest rates in the table below. Given that information, compute the following:

I. Expected interest rate under your forecast?

II. Variance, standard of deviation, and coefficient of variation of your interest rate forecast?

Economic Forecast Interest Rate Forecast

Recession 6%

Constant growth 9%

Inflation 14%

A...In the table below, you will find the annual stock return data on Krahamco and Avery Edit companies.

Given the information found in the table, what is the average annual return, variance and standard deviation for each stock?

What is the expected portfolio return on a portfolio comprised of:

1...25% Krahamco and 75% Avery Edit

2...50% Krahamco and 50% Avery Edit

3...75% Krahamco and 25% Avery Edit

4...Using no calculations, what do you expect the correlation on these stocks' returns to bepositive, negative, or zero? Why?

Year Krahamco Avery Edit

2015 10% -3%

2016 15% 0%

2017 -10% 15%

2018 5% 10%

B. Suppose the estimated Security Market Line for some asset is the following:

Required (or expected) Rate of Return = 3.0 + 6*Beta of the Asset

What is the current Treasury bill rate?

What is the current market risk premium?

What is the current expected market return?

What does the Beta of the asset measure?

Assume Beta =1.5 for this asset. What is the asset's required (or expected rate of return)?