a) Calculate the expected rate of return, FB, for stock B3 (FA= 14,30%) b) Calculate the standard deviation of expected returns, OA, for stock A (OB = 13.18%) Now calculate the coefficient of variation for stock B. C) Assume the risk-rate is 1.5% What are the Sharpe ratios for stocks A and B ? Stock A. Stock Bi
Risk and return are essential financial principles. The term “risk” refers to the uncertainty and possibility of loss in an investment. It is crucial to consider that increased risk frequently correlates with larger possible rewards and higher potential losses. The term” return” refers to the profit or loss on an investment and is usually stated as a percentage. Higher-risk investments have higher returns, whereas lower-risk assets have lower returns.
Investors seek to balance risk and return based on their objectives and risk tolerance. Diversification, the practice of distributing investments across multiple assets, is often employed in investment portfolios to minimize risk and optimize returns.
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