Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (5 %) (38 %) 0.2 5 0 0.5 14 21 0.1 23 27 0.1 28 38 Calculate the expected rate of return, , for Stock B ( = 12.60%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 20.20%.) 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:
Stocks A and B have the following probability distributions of expected future returns:
Probability A B
0.1 (5 %) (38 %)
0.2 5 0
0.5 14 21
0.1 23 27
0.1 28 38
Calculate the expected
Calculate the standard deviation of expected returns, σA, for Stock A (σB = 20.20%.) 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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