CFIN (with Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
5th Edition
ISBN: 9781305661653
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 8, Problem 5PROB
Summary Introduction
Expected
Standard deviation is the financial measure of risk and stability on the
Coefficient of variance is a measure used to calculate the total risk per unit of return of an investment.
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Students have asked these similar questions
Supposing the return from an investment has the following probability distribution
Return Probability
R (%)
8 0.2
10 0.2
12 0.5
14 0.1
Required:
What is the expected return of the investment?
What is the risk as measured by the standard deviation of expected returns?
Which of the following investments has the greater relative risk? (LO 8-2)
Investment
Expected Return
Standard Deviation
F
16.0%
7.0%
G
27.0
13.0
Normal probability distribution
Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return,
r,
is
10.4%;
and that the coefficient of variation,
CV,
is
1.01,
answer the following questions:
a. Find the standard deviation of returns,
σr.
b. Calculate the range of expected return outcomes associated with the following probabilities of occurrence: (1) 68%, (2) 95%, (3) 99%.
Chapter 8 Solutions
CFIN (with Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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- Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return, r, is 18.7%; and that the coefficient of variation, CV, is 1.88, answer the following questions: a. Find the standard deviation of returns, sigma Subscript rσr. b. Calculate the range of expected return outcomes associated with the following probabilities of occurrence: (1) 68%, (2) 95%, (3) 99%.arrow_forwardCompute the (a) expected return, (b) standard deviation, and (c) coefficient of variation for investments with the following probability distributions: Probability r/A r/B 0.3 30.0% 5.0% 0.2 10.0 15.0 0.5 -2.0 25.0arrow_forwardAn investment has probabilities 0.15, 0.34, 0.44, 0.67, 0.2 and 0.15 of giving returns equal to 50%, 39%, -4%, 20%, -25%, and 42%. What are the expected returns and the standard deviations of returns?arrow_forward
- Calculate the expected return for an investment with the following probability distribution. Return (%) Probability (%) -10 20 5 20 10 20 17 30 26 10arrow_forwardThe standard deviation of return on investment a is 0.10, while the standard deviation of return on investment b is 0.04. If the correlation coefficient between the returns on A and B is_____________. A. -0.0447 B. -0.0020 C. 0.0020 D. 0.0447arrow_forwardGg.50.arrow_forward
- Assuming the following returns and corresponding probabilities for Asset D: Rate of Return Probability 10% 30% 15% 40% 20% 30% Compute for: a. Expected rate of return b. The standard deviation c. The coefficient of variationarrow_forwardcan you evaluate the portfolio performance ?arrow_forward1. Calculate the Expected Return and Risk measured in terms of standard deviation and Variance relating to the following information of a Investment avenue: Return in Percentage: -15-10-5+5+10+15 Probability:.10.15.20.20.25.10arrow_forward
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