Question

Ch 08: Blueprint Problems - Risk and Rates of Return returns per unit of risk. The Sharpe ratio is calculated as: Search this Sharpe ratio LIMITED (Return-Risk free rate) Quantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Probability Rate of return e Catalog er Offers Strong Normal Weak 224 0.25 0.45 0.30 Options What is the stock's expected return? Do not round intermediate calculations. Round your answer to two decimal places e Success er Center What is the stock's standard deviation? Do not round intermediate calculation Round your answer to the decimal SA - MART What is the stock's coefficient of variation? Do not round intermediate calculations. Round your answer to two deca DISCOUNTLES Belo Google Drive DELL

Answer 1

В DE F H. 1 Rate of return 22% State of economy Probability Strong 0.25 Normal 0.45 Weak Return * probablility 5.50% 4.05% -1.20% 8.35% Expected (Expected return Probability* (Expected return -return-return)2 return - return)^2 - 13.65% 0.01863225 0.4658% -9.00% 0.0081 0.3645% 4.00% 0.0016 0.0480% Variance 0.8783% 0.3 9% -4% Expected return Standard deviation = 0.00878310.5 = 0.0937 or 9.37% Coefficient of variation = Expected return / Standard deviation = 8.35% / 9.37% = 0.89 13