What is the standard deviation of stock A if it has the following probabilities and rate of returns. Probability Return 0.3 -5% 0.4 14% 0.3 11% a. 9.11% b. 9.40% c. 8.62% d. 8.21%

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A: Recall the Black Scholes model derivation.Log of the stock price is normally distributed.The…

Q: Consider the following stocks with equal probabilities of return:   Outcome | Return (Stock A) |…

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A: Sharpe ratio = (Expected return - Risk free rate of return) / Standard deviation

Q: Exercises: a. The standard deviation of returns is 0.30 for Stock A and 0.20 for Stock B. The…

A: Hi, there, Thanks for posting the question. As per our Q&A honour code, we must answer the first…

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: Given: Required returnr=8%Risk free raterRF=3%Market returnrM=12%

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A: Stock’s expected return is the return which is expected to be generated from the project. This…

Q: 1. Consider 3 stocks A, B, and C and the risk-free rate RF=0.5%. The logarithmic rates of return are…

A: Hi, since you have posted multiple questions and the first uestion has multiple sub-parts. We will…

Q: What is the standard deviation of Stock A returns given the information below about its returns…

A: Solution:- Standard deviation means the deviation of a value around its mean. Standard deviation in…

Q: Suppose 0.3 is the correlation of returns between any two stocks in an equal-weighted portfolio…

A: The volatility of a Portfolio indicates an overall risk of a portfolio, it is the measure of…

Q: 1.2. Refer to the following observations for stock A and the market portfolio in the table: Month…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

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A: Note: Return of the stock is taken what was provided in the previous question. Please adjust the…

Q: Drawing Examples ven the following information, what is e standard deviation of the returns on is…

A: In this first we have to calculate mean return and deviations from mean and from that.

Q: Q.Which of the following statements are true/false: I: The implied volatility of a stock can be…

A: Implied Volatility is the value of the volatility of the underlying asset which equates the price of…

Q: What is the standard deviation of Oliver's stock, giving the following information: Probability 30%…

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A: The provided information are: Expected returnrL=8%=0.08Risk-free raterRF=3%=0.03Market…

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Q: Suppose that the average stock has a volatility of 53%, and that the correlation between pairs of…

A: A combined investment that includes different kinds of market securities is term as the portfolio.

Q: A portfolio is invested 22 percent in Stock G, 26 percent in Stock J, with remainder in Stock K. The…

A: The formula to calculate portfolio expected return is given below:

Q: Given the following information, determine the beta coefficient for Stock L that is consistent with…

A: Given: rL = 8%, rRf = 3%, rm = 12%

Q: Stock A Stock B Market Standard Deviation Return Correlation Coefficient between A & M Correlation…

A: The Capital Asset Pricing Model(CAPM) refers to the relationship between expected return for assets…

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A: Given: Weight 75% 25% Year Stock A Stock B 2010 -10% 16% 2011 5% 20% 2012 2% 26% 2013…

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A: As per CAPM, Return on portfolio = risk free rate + beta * (return on market - risk free rate)

Q: wo stock prices for six days are given below.   Price A Price B 25 55 27 59 30 64 28 62 26 58…

A: The standard deviation is a tool that helps to measure the variation between the average data and…

Q: What is the coefficient of variation for stock A?

A: Information Provided: Stock A expected return = 8% Stock A risk = 6%

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Q: Q4: Assume the following information for stocks A and B. • Expected return on Stock A = 18%. •…

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Q: 1.2. Refer to the following observations for stock A and the market portfolio in the table: Month…

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Q: a. What are the expected returns of the two stocks? b. What are the standard deviations of the…

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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.