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Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (7 %) (28 %) 0.2 5 0 0.4
Stocks A and B have the following probability distributions of expected future returns:
Probability | A | B | ||
0.1 | (7 | %) | (28 | %) |
0.2 | 5 | 0 | ||
0.4 | 15 | 18 | ||
0.2 | 22 | 28 | ||
0.1 | 29 | 46 |
- Calculate the expected rate of return, , for Stock B ( = 13.60%.) Do not round intermediate calculations. Round your answer to two decimal places.
- Calculate the standard deviation of expected returns, A, for Stock A (B = 19.06%.) Do not round intermediate calculations. Round your answer to two decimal places.
- Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places.
- Assume the risk-free rate is 4.5%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to four decimal places.
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