Risk and Return: Stand-Alone Risk Stand-alone risk is the risk an investor would face if he or she held expected rate of return is high enough to compensate for its perceived realized from an investment; it is calculated as the No investment should be undertaken unless its . The expected rate of return is the return expected to be of the probability distribution of possible results as shown below: Expectedrateofreturn=r^=p1r1+p2r2++pnrn=i=1npiri The an asset's probability distribution, the lower its risk. Two useful measures of stand-alone risk are standard deviation and coefficient of variation. Standard deviation is a statistical measure of the variability of a set of observations as shown below: Standarddeviation==i=1npi(rix^)2 If you have a sample of actual historical data, then the standard deviation calculation would be changed as follows: Estimated=S=T1t=1T(rtrAvg)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 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 Quantitative Problem: You are given the following probability distribution for CHC Enterprises: 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? Round your answer to two decimal places. Do not round intermediate calculations