A stock’s returns have the following distribution: Demand for the Company’s Products Probability of this Demand Occurring Rate of Return if this Demand Occurs Weak 0.1 (30%) Below average 0.1 (14) Average 0.3 11 Above average 0.3 20 Strong 0.2 45 1.0 Assume the risk-free rate is 2%. Calculate the stock’s expected return, standard deviation, coefficient of variation, and Sharpe ratio
A stock’s returns have the following distribution: Demand for the Company’s Products Probability of this Demand Occurring Rate of Return if this Demand Occurs Weak 0.1 (30%) Below average 0.1 (14) Average 0.3 11 Above average 0.3 20 Strong 0.2 45 1.0 Assume the risk-free rate is 2%. Calculate the stock’s expected return, standard deviation, coefficient of variation, and Sharpe ratio
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 5P
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Question
A stock’s returns have the following distribution:
Demand for the
Company’s Products
Probability of this
Demand Occurring
Rate of Return if this
Demand Occurs
Weak 0.1 (30%)
Below average 0.1 (14)
Average 0.3 11
Above average 0.3 20
Strong 0.2 45
1.0
Assume the risk-free rate is 2%. Calculate the stock’s expected return, standard deviation,
coefficient of variation, and Sharpe ratio.
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