Answer to Part A:
Expected Return = 0.30 * 0.30 + 0.40 * 0.10 + 0.30 *
(-0.25)
Expected Return = 0.0550
Variance = 0.30 * (0.30 - 0.055)^2 + 0.40 * (0.10 - 0.055)^2 +
0.30 * (-0.25 - 0.055)^2
Variance = 0.046725
Standard Deviation = (0.046725)^(1/2)
Standard Deviation = 0.21616
Coefficient of Variation = Standard Deviation / Expected
Return
Coefficient of Variation = 0.21616 / 0.0550
Coefficient of Variation = 3.93018
Answer to Part B:
Expected Return = 0.40 * 0.25 + 0.10 * 0.15 + 0.30 * 0.10 + 0.20
* (-0.05)
Expected Return = 0.1350
Variance = 0.40 * (0.25 - 0.135)^2 + 0.10 * (0.15 - 0.135)^2 +
0.30 * (0.10 - 0.135)^2 + 0.20 * (-0.05 - 0.135)^2
Variance = 0.012525
Standard Deviation = (0.012525)^(1/2)
Standard Deviation = 0.111915
Coefficient of Variation = Standard Deviation / Expected
Return
Coefficient of Variation = 0.111915 / 0.1350
Coefficient of Variation = 0.82900
Answer to Part C:
Expected Return = 0.10 * 0.36 + 0.20 * 0.21 + 0.30 * 0.08 + 0.20
* 0.03 + 0.20 * (-0.08)
Expected Return = 0.0920
Variance = 0.10 * (0.36 - 0.092)^2 + 0.20 * (0.21 - 0.092)^2 +
0.30 * (0.08 - 0.092)^2 + 0.20 * (0.03 - 0.092)^2 + 0.20 * (-0.08 -
0.092)^2
Variance = 0.016696
Standard Deviation = (0.016696)^(1/2)
Standard Deviation = 0.129213
Coefficient of Variation = Standard Deviation / Expected
Return
Coefficient of Variation = 0.129213 / 0.0920
Coefficient of Variation = 1.40449
Problem 6.18 Following are the independent situations. Kate recently invested in real estate with the intention...
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