Stocks X and Y have the following probability distributions of expected future returns:Probability0.10.20.40.20.1O1.02 and 1.471.02 and 1.151.11 and 1.47What are the coefficient of variations of both X and Y?1.11 and 1.35X(10%)O111 and 1.1522041248Y(35%)0202555

ProbabilityXY0.1-35%-10%0.20%2%0.420%12%0.225%20%0.155%48%Required:Coefficient of Variation of both…

Stocks X and Y have the following probability distributions of expected future returns: Probability 0.1 0.2 0.4 0.2 0.1 1.02 and 1.47 1.02 and 1.15 X (10%) O1.11 and 1.47 111 and 1.35 O111 and 1.15 2228 12 What are the coefficient of variations of both X and Y? 20 48 Y (35%) 0225 55

Stocks X and Y have the following probability distributions of expected future returns: Probability 0.1 0.2 0.4 0.2 0.1 1.02 and 1.47 1.02 and 1.15 X (10%) O1.11 and 1.47 111 and 1.35 O111 and 1.15 2228 12 What are the coefficient of variations of both X and Y? 20 48 Y (35%) 0225 55

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 1P

See similar textbooks

Related questions

Q: How much would you have to deposit into a bank at the beginning of every 6 months to have a total of…

A: We need to use future value of annuity due formula to calculate semi annual payment.whereFVn =future…

Q: R150 000 is invested at a compound interest rate that is compounded quarterly. After 6 years the…

A: An annuity is a financial product or investment contract that provides a series of regular payments…

Q: GTO Incorporated is considering an investment costing $224,970 that results in net cash flows of…

A: IRR represents the rate at which the value generated by the project becomes equivalent to zero.…

Q: Which one of the following statements is correct? Multiple Choice O O O O O If the total debt ratio…

A: Financial ratios serve as valuable tools for understanding a company's financial position,…

Q: A hog producer has 300 head of market hogs that will be marketed in March at an average weight of…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: a. Use the profitability index to select projects subject to the constraint that the firm can only…

A: The profitability index (PI) is a financial metric used to evaluate the potential profitability of…

Q: Esfandairi Enterprises is considering a new three-year expansion project that requires an initial…

A: NPV is the difference between the project value of cash flow and initial investment and it must be…

Q: You have just assessed a project, involving an immediate cash outflow followed by a series of cash…

A: NPV is defined as the sum of the present values of all future cash inflows less the sum of the…

Q: Given the following bid and ask prices quoted by a dealer: Bid price of $1.1250/€ and Ask price of…

A: We are given the bid and ask prices of $1.1250 /Euro and $1.1255 respectively.Required: select the…

Q: Rolf's Golf store sells golf balls for 27 per dozen. The store's overhead expenses are 28% of cost…

A: Determine the variables in the question:Sales price= $27 per dozen (Assumed $ as the…

Q: 1. Break-even analysis To be profitable, a firm must recover its costs. These costs include both its…

A: Fixed Cost $ 1,00,00,000.00Sale price per unit $…

Q: Consider a bond with a face value of $2,000 that pays a coupon of $150 for 10 years. Suppose the…

A: Yield to maturity is the rate of yield received when a bond is kept till maturity. It is total…

Q: Required information [The following information applies to the questions displayed below.] The…

A: Target price is the sum of cost plus profit.Markup:- It is the amount of addition to the cost price…

Q: Alan borrows $100,000 at nominal interest rate 9% per annum which matures in 5 years. Repayments are…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: Dayo is long a bear spread with strike prices 9.00 and 19.00. The Ons expire in 12 months, the spot…

A: A Long Bear Spread Strategy:Buy a lower strike put option: The trader buys a put option with a lower…

Q: Delta Games Private Limited is a digital gaming company creating fun-to-play games for millenials.…

A: Seed funding is the first equity that a company raises for its functioning. A Series-A investment is…

Q: A bond is currently selling for 88. It was issued 8 years ago and has 10 years left until maturity.…

A: Current Price of Bond = pv = 88Time = nper = 10 YearsCoupon rate = 9%Assuming face Value = fv = 100

Q: (Equivalent annual annuity) Rib & Wings-R-Us is considering the purchase of a new smoker oven for…

A: 1. Present value annuity factor ( PVAF ) is computed by following formula:-PVAF = where,, 99, 254);…

Q: You are analyzing the following two mutually exclusive projects and information. Please calculate…

A: IRR is the internal rate of return and is the break-even rate at which present value of cash flow is…

Q: 1 unit of Currency A costs 1.47 units of Currency B, 1 unit of Currency B costs 0.66 units of…

A: Triangular arbitrage refers to the arbitrage opportunity arises due to the pricing discrepancy of…

Q: maintenance is P20,000.00. If money is worth 14% per annum, determine the number of days per year a…

A: First we need to determine the Equivalent Annual Cost (AEC) of owning the truck. AEC is the cost of…

Q: A family currently live in an apartment whose monthly rent is $950. They are thinking of buying a…

A: Monthly Rent = $950 Increase in rent every year = 2.5%Thus, if house is purchased and financed this…

Q: Andrew just calculated the present value of a $15,000 bonus he will receive next year. The interest…

A: The concept of time value of money will be used here.To compute the present value of an amount we…

Q: (Related to Checkpoint 5.2) (Future value) Bob Terwilliger received $15,209 for his services as…

A: The amount that an individual expects to receive at a certain date in the future is the future value…

Q: 1) ABC pays an annual dividend, and it has reached its matured stage. Management thinks that they…

A: Dividend paid$4.50Market required return6.50%Growth rate4%Required: a) ABC's Fair stock price=?b1)…

Q: The following table reports the nominal exchange rate of the US dollar against two other American…

A: We are given that Mr. Garamond wants to invest Euro 2.5 m for one year & the available…

Q: stimated current price of a share of ABC Company stock based on the Dividend Discount Model? The…

A: Dividend Discount Model is the phenomenon used to estimate the current market price of the stock.

Q: The consulting company Harris White & Jackson (HW J) is in that never-ending budgeting phase of the…

A: Net Present Value - Calculation used to evaluate the investment and financing decisions that involve…

Q: Konstantin wants to buy a 2 month European style put option on $1 on USD. The spot USD/CAD exchange…

A: The binomial model is a mathematical model used in finance to value options. It assumes that the…

Q: A Scarlet Company received an invoice for $71,000.00 that had payment terms of 4/5 n/30. If it made…

A: A seller will provide a buyer a certain amount of time to pay for goods or services after they have…

Q: e choice between the two options? If the interest rate is greater than the indifference rate, which…

A: Present value is the equivalent value today of the future cash flow based on the time and interest…

Q: Returns on stocks X and Y are listed below: Period 1234567 Stock X 2% -1% 4% 5% 4% 7% 0% Stock Y 5%…

A: Here, PeriodStock XStock…

Q: managerial incentives to engage in Earnings Management during crisis periods, such as the recent…

A: The concept of earnings management refers to the practice of deliberately manipulating financial…

Q: Dani Corporation has 4 million shares of common stock outstanding. The current share price is $76,…

A: WACC is weighted average cost of capital and is weighted cost of bond and weighted cost of equity…

Q: (Related to Checkpoint 5.6) (Solving for i) You lend a friend $10,000, for which your friend will…

A: Future value refers to the value that an investment or asset will have at a specific point in the…

Q: Suppose you are given the following information about the default- free, coupon-paying yield curve:…

A: Here,Maturity123Coupon Rate0%10%6%YTM3.000%4.908%6.840%

Q: A 20 year original maturity bond was issued 7 years ago with a stated coupon rate of 4%. If the…

A: Bond YTM, or Yield to Maturity, is the total return anticipated by an investor if the bond is held…

Q: A-Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital…

A: Average historical growth rate involves the process of finding out the average increase in the value…

Q: Bill Bob paid $1,100 for a 15-year bond 10-years ago. The bond pays a coupon of 8 percent…

A: We will be using Excel function, =RATE to find realized yield.=RATE(nper,pmt,pv,FV,type,guess)

Q: a. Which alternative should Morin select? b. If the bank's compensating-balance requirement had…

A: First we need to determine the cost of alternative A without the compensating balance. For this we…

Q: Milly Corp's common stock is expected to pay a $5 dividend in the coming year. If investors require…

A: Dividend - This is the amount which is paid by the company to its shareholders. Dividend includes…

Q: uppose that the simple annual returns on an investment over a 3-year period are: 8%, 2%, and 12%.…

A: Put option gives the opportunity to sell stock on the expiration but there is no obligation to do…

Q: These are the quotes from the spot market. Citigroup Credit Suisse Deutsche Bank ¥122/€ ¥126/$…

A: Triangular arbitrage is an arbitrage opportunity resulting from the pricing discrepancy of three…

Q: Consider the following Balance Sheet related data for Kairful Finance Corp. (KFC), a Canadian…

A: Duration of Equity, also known as Equity Duration, is a financial metric used to measure the…

Q: else constant, which one of the following will result in the lowest present value of a lump sum?…

A: The present value concept is a fundamental principle in finance, reflecting the notion that money…

Q: You graduated college six years ago with an undergraduate degree in Finance. Although satisfied with…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: During the continuous trading session, orders were placed for CLC stock as follows: i. Calculate the…

A: Continuous Trading SessionOrders are regularly fulfilled in the precise order of price and time. An…

Q: Cost of Equity The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 8%…

A: Cost of Equity:The expense that the issuer will incur is known as the cost of equity.. The return…

Q: Christine Norton-Hines is a young Hollywood writer who is well on her way to television…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: You are considering purchasing a stock that is expected to pay a dividend of $5 at the end of the…

A: When the company receives profits and distributes them among the shareholders. That share of profit…

Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

Stocks X and Y have the following probability distributions of expected future returns:
Probability
0.1
0.2
0.4
0.2
0.1
O1.02 and 1.47
1.02 and 1.15
1.11 and 1.47
What are the coefficient of variations of both X and Y?
1.11 and 1.35
X
(10%)
O111 and 1.15
2204
12
48
Y
(35%)
0
20
25
55

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Determine Given variants

VIEW

Step 2: Computation of Coefficient of Variation of Sock X

VIEW

Step 3: Computation of the Coefficient of Variation of Stock Y

VIEW

Solution

VIEW

Step by step

Solved in 4 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

What are the expected returns for stocks Y and Z under the conditions shown below? A0 0.04 k1 0.07 k2 0.05 by,1 0.5 by,2 1.3 bz,1 1.2 bz,2 0.9
Stocks Y has the following probability distributions of expected future returns PROBABILITY Y% 0.1 8 0.3 12 0.4 15 0.2 35 0.6 52 What is the Risk per unit return of Stock Y?
Consider information given in the table below and answers the question asked thereafter: State Probability return on stock A Return on stock B A 0.15 10% 9% B 0.15 6% 15% C 0.10 20% 10% D 0.18 5% -8% E 0.12 -10% 20% F 0.30 8% 5% Calculate covariance and coefficient of correlation between the returns of thestocks A and B.v. Now suppose you have $100,000 to invest and you want to a hold a portfoliocomprising of $45,000 invested in stock A and remaining amount in stock B.Calculate risk and return of your portfolio.
EXPECTED RETURNS Stocks X and Y have the following probability distributions ofexpected future returns:Probability X Y0.1 (10%) (35%)0.2 2 00.4 12 200.2 20 2S0.1 38 45a. Calculate the expected rate of return, rˆY, for Stock Y ( rˆX= 12%).b. Calculate the standard deviation of expected returns, σX, for Stock X (σY =20.35%). Now calculate the coefficient of variation for Stock Y. Is it possible thatmost investors will regard Stock Y as being less risky than Stock X? Explain.
The market and Stock J have the following probability distributions: ProbabIlity rM rJ 0.3 15% 20% 0.4 9 5 0.3 18 12 A. Calculate the expected rates of return for the market and Stock J. B. Calculate the standard deviations for the market and Stock J
The probability distribution of returns for the two stocks X and Y are as follows: Probability 0.1 0.3 0.05 0.25 0.15 0.15 For each of the two stocks, calculate: a. The expected return. b. Variance of returns c. Volatility of returns. Stock X 0.05 -0.1 0.08 -0.08 0.20 0.12 Return Stock Y 0.13 0,04 -0.12 0.21 0.1 -0.05
The market and Stock J have the following probability distributions: Probability rM rJ 0.3 15% 20% 0.4 9 5 0.3 18 12 Calculate the expected rates of return for the market and Stock J. Calculate the standard deviations for the market and Stock J. Calculate the coefficients of variation for the market and Stock J.
You have estimated the following probability distributions of expected future returns for Stocks X and Y: Stock X Stock Y Probability Return Probability Return 0.1 -12 % 0.2 4 % 0.1 11 0.2 7 0.3 14 0.3 11 0.3 30 0.2 17 0.2 40 0.1 30 What is the expected rate of return for Stock X? Stock Y? Round your answers to one decimal place.Stock X: % Stock Y: % What is the standard deviation of expected returns for Stock X? For Stock Y? Round your answers to two decimal places.Stock X: % Stock Y: % Which stock would you consider to be riskier? is riskier because it has a standard deviation of returns.
Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10% 8% 2 0.20 13% 7% 3 0.20 12% 6% 4 0.30 14% 9% 5 0.20 15% 8% The coefficient of correlation between A and B is:
The market and Stock A have the following probability distributions: Probability Return on market Return on Stock A 0.2 18% 16% 0.3 12% 14% 0.5 10% 11% Calculate the expected rates of return for the market and Stock A. Calculate the coefficient of variation for the market and Stock A (Standard deviation for market is 3.0265% and standard deviation for Stock A is 2.0224%).
The market and Stock J have the following probability distributions: Probability rM rJ 0.3 14 % 18 % 0.4 10 4 0.3 18 13 Calculate the expected rates of return for the market and Stock J. Round your answers to one decimal place. Expected rate of return (Market): % Expected rate of return (Stock J): % Calculate the standard deviations for the market and Stock J. Do not round intermediate calculations. Round your answers to two decimal places. Standard deviation (Market): % Standard deviation (Stock J): %
Stock A and B have the following probability distributions of expected future returns: Probability A B 0.1 (20%) (46%) 0.2 7 0 0.4 15 15 0.2 23 30 0.1 47 50 What is the expected rate of return for Stock A? What is the standard deviation of returns for Stock B?