Question 22 2 pts To calculate the Expected Rate of Return for USR (US Rubber): Economy Prob. T-Bills HT Coll Recession 0.1 3.0% -29.5% 24.5% USR MP 3.5% -19.5% Below avg 0.2 3.0% -9.5% 10.5% -16.5% -5.5% Average 0.4 3.0% 12.5% -1.0% 0.5% 7.5% Above avg 0.2 3.0% 27.5% -5.0% 38.5% 22.5% Boom 0.1 3.0% 42.5% -20.0% 23.5% 35.5% (0.11.035) + (0.24-165) + (0.4)(0.005) + (0.21.385) + (0.18.235) = 7.3% Subtract expected return of T-Bills from expected return of High Tech, 9.9% -3% -6.9% Square root of the variance which is the standard deviation, or 18.8% Square the variance and divide by the expected return to derive coefficient of variation. (0.1)-295) + (0.2X-.095) + (0.4%.125) + (0.2/275) + (0.18.425) = 9.9% Question 23 2 pts Standard deviation calculations are the following: OHT - 20%, ocou - 11.2%, OM - 15.2%, USR - 18.8%, and OT-Bills-0%. Which of the following has the widest dispersion around the expected return; which is most narrow? Economy Prob. T-Bills HT Coll Recession 0.1 3.0% -29.5% 24.5% USR MP 3.5% -19.5% Below avg 0.2 3.0% -9.5% 10.5% -16.5% -5.5% Average 0.4 3.0% 12.5% -1.0% 0.5% 7.5% Above avg 0.2 3.0% 27.5% -5.0% 38.5% 22.5% Boom 0.1 3.0% 42.5% -20.0% 23.5% 35.5% Widest: T-Bills. Narrow. High-Tech Widest: High-Tech. Narrow. T-Bills Widest: USR. Narrow. Collections Widest: Market. Narrow, Market Widest: High-Tech Narrow: USR