Quantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Strong Normal % Probability. 0.25 0.45 0.30 % Rate of return Weak What is the stock's expected return? Do not round intermediate calculations. Round your answer to two decimal places. 19% 10% -6% What is the stock's standard deviation? Do not round intermediate calculations. Round your answer to two decimal places. What is the stock's coefficient of variation? Do not round intermediate calculations. Round your answer to two decimal places.
Quantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Strong Normal % Probability. 0.25 0.45 0.30 % Rate of return Weak What is the stock's expected return? Do not round intermediate calculations. Round your answer to two decimal places. 19% 10% -6% What is the stock's standard deviation? Do not round intermediate calculations. Round your answer to two decimal places. What is the stock's coefficient of variation? Do not round intermediate calculations. Round your answer to two decimal places.
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 14P
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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:Strong
Normal
Quantitative Problem: You are given the following probability distribution for CHC
Enterprises:
State of Economy
Sharpe ratio =
%
Probability.
%
(Return - Risk-free rate)/o
0.25
0.45
0.30
Rate of return
Weak
What is the stock's expected return? Do not round intermediate calculations. Round
your answer to two decimal places.
19%
10%
-6%
What is the stock's standard deviation? Do not round intermediate calculations. Round
your answer to two decimal places.
What is the stock's coefficient of variation? Do not round intermediate calculations.
Round your answer to two decimal places.
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