Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (11 %) (29 %) 0.1 6 0 0.5 16 21 0.2 23 27 0.1 33 49 Calculate the expected rate of return, , for Stock B ( = 15.40%.) Do not round intermediate calculations. Round your answer to two decimal places. Calculate the standard deviation of expected returns, σA, for Stock A (σB = 19.24%.) 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 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:
Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (11 %) (29 %) 0.1 6 0 0.5 16 21 0.2 23 27 0.1 33 49 Calculate the expected rate of return, , for Stock B ( = 15.40%.) Do not round intermediate calculations. Round your answer to two decimal places. Calculate the standard deviation of expected returns, σA, for Stock A (σB = 19.24%.) 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 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:
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Stocks A and B have the following probability distributions of expected future returns:
| Probability | A | B | ||
| 0.1 | (11 | %) | (29 | %) |
| 0.1 | 6 | 0 | ||
| 0.5 | 16 | 21 | ||
| 0.2 | 23 | 27 | ||
| 0.1 | 33 | 49 |
- Calculate the expected
rate of return , , for Stock B ( = 15.40%.) Do not round intermediate calculations. Round your answer to two decimal places. - Calculate the standard deviation of expected returns, σA, for Stock A (σB = 19.24%.) 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 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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