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Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (12 %) (34 %) 0.2 4 0 0.5
Stocks A and B have the following probability distributions of expected future returns:
Probability | A | B | ||
0.1 | (12 | %) | (34 | %) |
0.2 | 4 | 0 | ||
0.5 | 10 | 18 | ||
0.1 | 20 | 27 | ||
0.1 | 34 | 36 |
- Calculate the expected rate of return, , for Stock B ( = 10.00%.) Do not round intermediate calculations. Round your answer to two decimal places.
%
- Calculate the standard deviation of expected returns, A, for Stock A (B = 18.40%.) 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 2.5%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to four decimal places.
Stock A:
Stock B:
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