Stand-alone risk is the risk an investor would face if he or she held only -Select-one portfolioone assetmultiple assetsCorrect 1 of Item 1. No investment should be undertaken unless its expected rate of return is high enough to compensate for its perceived -Select-riskcostreturnCorrect 2 of Item 1. The expected rate of return is the return expected to be realized from an investment; it is calculated as the -Select-combined sumstandard deviationweighted averageCorrect 3 of Item 1 of the probability distribution of possible results as shown below:

The -Select-widertighterbroaderCorrect 4 of Item 1 an asset's probability distribution, the lower its risk. Three useful measures of stand-alone risk are standard deviation, coefficient of variation, and the Sharpe ratio. Standard deviation is a statistical measure of the variability of a set of observations as shown below:

If you have a sample of actual historical data, then the standard deviation calculation would be changed as follows:

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 -Select-correlation coefficientrisk premiumstandard deviationCorrect 5 of Item 1 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 -Select-identicaldifferentcorrelatedCorrect 6 of Item 1.

The Sharpe ratio compares the asset's realized excess return to its -Select-coefficient of variationstandard deviationaverage returnCorrect 7 of Item 1 over a specified period. Excess returns measure the amount that investment returns are above the risk-free rate so investments with returns equal to the risk-free rate will have a -Select-positivenegativezeroCorrect 8 of Item 1 Sharpe ratio. It follows that over a given time period, investments with -Select-higherlowerCorrect 9 of Item 1 Sharpe ratios performed better, because they generated -Select-higherlowerCorrect 10 of Item 1 excess returns per unit of risk. The Sharpe ratio is calculated as:

Quantitative Problem: You are given the following probability distribution for CHC Enterprises:

State of Economy	Probability	Rate of return
Strong	0.15	20	%
Normal	0.55	8	%
Weak	0.30	-4	%

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? Do not round intermediate calculations. Round your answer to two decimal places.