PART III RISK AND RETURN Cell for "2" State of the Economy Worst case Poor case Most likely Good case Best case Return on Probability Treasury of Bond in Occurrence Upcoming Year 0.10 -0.34 0.20 -0.04 0.40 0.06 0.20 0.16 0.10 0.26 1.00 0.04000 0.02360 0.15362 3.84057 Expected return Variance STDEV CV You were provided with the above information about T-bills. Answer the following questions in the paces provided: 1. What does the expected return represent, and how is it calculated? 2. What does STDEV represent? 3. What is the significance of the coefficient of variation? How is it calculated! Jse the data shown below to answer the questions in the spaces provided: WEIGHTS 0.50 0.50 Year Home Chef 0.26 0.15 -0.14 -0.151 0.02 5 Market 0.30 0.07 0.18 -0.22 -0.14 0.10 0.26 -0.10 -0.03 0.38 0.0800 0.1908 Bake Date 0.47 -0.54 0.15 0.07 -0.28 0.40 0.17 -0.23 -0.04 0.75 0.0920 0.3660 PORTFOLIO 0.37 -0.20 0.00 -0.04 -0.13 0.11 0.30 0.04 -0.18 0.52 0.0780 0.2295 -0.18 7 8 9 10 0.42 0.30 -0.32 0.28 0.0640 0.2390 avg stdev 2.9429 3.978 2.386 - 3.734 3.734 4. How were the 'avg' values calculated? Briefly describe how this calculation differed from the calculation of the expected returns for the T Bonds shown earlier. 5. Based just on average returns, which of the three (Market, HomeChef, BakeDate) offers the highest return? 6. Which of the three has the highest risk? 7. Which tool or measurement would be used to make the choice amongst the three assets