Stand-alone risk is the risk an investor would face if he or she held only -Select- No investment should be undertaken unless its expected rate of return is high enough to compensate for its perceived -Select- . The expected rate of return is the return expected to be realized from an investment; it is calculated as the -Select- of the probability distribution of possible results as shown below: Expected rate of return = f = Pyr + P2r2 + ... + PNIN = Piri i=1 The -Select- 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: Standard deviation = = N (ri i=1 If you have a sample of actual historical data, then the standard deviation calculation would be changed as follows: ( FAvg)? tel Estimated o= N-1 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- divided by the expected return. The coefficient of variation show the risk per unit of return, so it provides a more meaningful risk measure when the expected returns on two alternatives are not -Select- The Sharpe ratio compares the asset's realized excess return to its -Select- 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- Sharpe ratio. It follows that over a given time period, investments with -Select- Sharpe ratios performed better, because they generated higher -Select- excess returns per unit of risk. The Sharpe ratio is calculated as: Sharpe ratio = (Return - Risk-free rate)/ Quantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Probability Rate of return Strong 0.25 20% Normal 0.50 8% Weak 0.25 What is the stock's expected return? Do not round intermediate calculations. Round your answer to two decimal places. -4% % 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