Fundamentals of Financial Management (MindTap Course List)
14th Edition
ISBN: 9781285867977
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 8, Problem 1P
Summary Introduction
To determine: The stocks expected return, standard deviation, and coefficient of variation.
Portfolio: It refers to a group of financial assets like bonds, stocks, and equivalents of cash. The portfolio is held by investors and financial users. A portfolio is constructed in accordance with the risk tolerance and the objectives of the company.
Expected Return on Stock: The expected return on stock refers to the weighted average of expected
Standard Deviation: The standard deviation refers to the stand-alone risk associated with the securities. It measures how much a data is dispersed with its standard value. Sigma represents the standard deviation.
Coefficient variation: The coefficient of variation is a tool to determine the risk. It determines the risk per unit of return. It is used for measurement, when the expected returns are same for two data.
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Students have asked these similar questions
A stock’s return has the following distribution:
Demand for the
company’s products
Probability of this
demand occurring
Rate of Return if
this demand
occurs
Weak
0.1
(0.5)
Below Average
0.2
(0.05)
Average
0.4
0.16
Above Average
0.2
0.25
Strong
0.1
0.60
Use statistical measures to calculate the risk and return of the stock.
Expected Return: Discrete Distribution
A stock's return has the following distribution:
Demand for the Company's Products
Probability of This Demand Occurring
Rate of Return if This Demand Occurs (%)
Weak
0.1
-25%
Below average
0.2
-8
Average
0.4
7
Above average
0.2
35
Strong
0.1
60
1.0
Calculate the stock's expected return. Round your answer to two decimal places.___%
Calculate the standard deviation. Round your answer to two decimal places.___%
(a) A stock’s returns have the following distribution:
Calculate the stock’s expected return, standard deviation, and the coefficient of variation.
Chapter 8 Solutions
Fundamentals of Financial Management (MindTap Course List)
Ch. 8 - Prob. 1QCh. 8 - Prob. 2QCh. 8 - Prob. 3QCh. 8 - Is it possible to construct a portfolio of...Ch. 8 - Stock A has an expected return of 7%, a standard...Ch. 8 - A stock had a 12% return last year, a year when...Ch. 8 - If investors aversion to risk increased, would the...Ch. 8 - Prob. 8QCh. 8 - In Chapter 7, we saw that if the market interest...Ch. 8 - Prob. 1P
Ch. 8 - PORTFOLIO BETA An individual has 35,000 invested...Ch. 8 - REQUIRED RATE OF RETURN Assume that the risk-free...Ch. 8 - EXPECTED AND REQUIRED RATES OF RETURN Assume that...Ch. 8 - BETA AND REQUIRED RATE OF RETURN A stock has a...Ch. 8 - EXPECTED RETURNS Stocks X and Y have the following...Ch. 8 - Prob. 7PCh. 8 - BETA COEFFICIENT Given the following information...Ch. 8 - REQUIRED RATE OF RETURN Stock R has a beta of 1.5,...Ch. 8 - CAPM AND REQUIRED RETURN Bradford Manufacturing...Ch. 8 - CAPM AND REQUIRED RETURN Calculate the required...Ch. 8 - REQUIRED RATE OF RETURN Suppose rRF = 9%, rM = 14%...Ch. 8 - CAPM, PORTFOLIO RISK. AND RETURN Consider the...Ch. 8 - PORTFOLIO BETA Suppose you held a diversified...Ch. 8 - Prob. 15PCh. 8 - CAPM AND PORTFOLIO RETURN You have been managing a...Ch. 8 - PORTFOLIO BETA A mutual fund manager has a 20...Ch. 8 - EXPECTED RETURNS Suppose you won the lottery and...Ch. 8 - EVALUATING RISK AND RETURN Stock X has a 10%...Ch. 8 - REALIZED RATES OF RETURN Stocks A and B have the...Ch. 8 - SECURITY MARKET LINE You plan to invest in the...Ch. 8 - Prob. 22SPCh. 8 - Prob. 23ICCh. 8 - Prob. 1TCLCh. 8 - Prob. 2TCLCh. 8 - Prob. 3TCLCh. 8 - Using Past Information to Estimate Required...Ch. 8 - Prob. 5TCLCh. 8 - Prob. 7TCLCh. 8 - Prob. 8TCL
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