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Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (13 %) (39 %) 0.1 3 0 0.6
Stocks A and B have the following probability distributions of expected future returns:
Probability | A | B | ||
0.1 | (13 | %) | (39 | %) |
0.1 | 3 | 0 | ||
0.6 | 16 | 23 | ||
0.1 | 19 | 29 | ||
0.1 | 32 | 43 |
- Calculate the expected rate of return, , for Stock B ( = 13.70%.) Do not round intermediate calculations. Round your answer to two decimal places.
%
- Calculate the standard deviation of expected returns, A, for Stock A (B = 21.12%.) 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 1.5%. 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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