A stock's returns have the following distribution: Sharpe ratio: % Demand for the Company's Products Weak Below average Average Above average Strong % Probability of this Demand Occurring Assume the risk-free rate is 3%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places. Stock's expected return: Standard deviation: Coefficient of variation: 0.1 0.1 0.4 0.3 0.1 1.0 Rate of Return if this Demand Occurs (38%) (11) 15 23 56
A stock's returns have the following distribution: Sharpe ratio: % Demand for the Company's Products Weak Below average Average Above average Strong % Probability of this Demand Occurring Assume the risk-free rate is 3%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places. Stock's expected return: Standard deviation: Coefficient of variation: 0.1 0.1 0.4 0.3 0.1 1.0 Rate of Return if this Demand Occurs (38%) (11) 15 23 56
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 15P
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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
Transcribed Image Text:A stock's returns have the following distribution:
Standard deviation:
Coefficient of variation:
Sharpe ratio:
%
Demand for the
Company's Products
Weak
Below average
%
Average
Above average
Strong
Probability of this
Demand Occurring
Assume the risk-free rate is 3%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round
your answers to two decimal places.
Stock's expected return:
0.1
0.1
0.4
0.3
0.1
1.0
Rate of Return if
this Demand Occurs
(38%)
(11)
15
23
56
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