Question
Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (14 %) (39 %) 0.2 2 0 0.5
Stocks A and B have the following probability distributions of expected future returns:
Probability A B 0.1 (14 %) (39 %) 0.2 2 0 0.5 16 24 0.1 22 25 0.1 30 42
A.)Calculate the expected rate of return, , for Stock B ( = 12.20%.) Do not round intermediate calculations. Round your answer to two decimal places.
B.)Calculate the standard deviation of expected returns, A, for Stock A (B = 21.45%.) 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.
C.) Assume the risk-free rate is 3.5%. 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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