Question

2. **Quantitative Problem:** You are given the
following probability distribution for CHC Enterprises:

State of Economy | Probability | Rate of return |

Strong | 0.25 | 22% |

Normal | 0.5 | 9% |

Weak | 0.25 | -6% |

- What is the stock's standard deviation? Round your answer to
two decimal places. Do not round intermediate calculations.

_____%

- What is the stock's coefficient of variation? Round your
answer to two decimal places. Do not round intermediate
calculations.

______

5.

A stock's returns have the following distribution:

Demand for theCompany's Products |
Probability of ThisDemand Occurring |
Rate of Return IfThis Demand Occurs |

Weak | 0.1 | (20%) |

Below average | 0.2 | (14) |

Average | 0.3 | 15 |

Above average | 0.1 | 22 |

Strong | 0.3 | 70 |

1.0 |

- Calculate the stock's coefficient of variation. Round your answer to two decimal places.

6. A stock has a required return of 9%; the risk-free rate is 4.5%; and the market risk premium is 4%.

- New stock's required rate of return will be ____%. Round your answer to two decimal places.

Answer #1

Expected return = sum of (probability of state * return of state)

E(X^2) = sum of (probability of state * return of state^2)

variance = E(X^2) - (E(X))^2

Standard deviation = sqrt(variance)

2)

State of Economy | Probability of Economy(X) | Rate of return |

strong | 0.25 | 22.00% |

normal | 0.50 | 9.00% |

weak | 0.25 | -6.00% |

Expected return E(X)=sum of(x*P(X)) |
8.50% | |

E(X^2) | 0.01705 | |

Variance=E(X^2)-E(X)^2 |
0.009825 | |

Standard deviation=sqrt(Variance) |
9.91% | |

coefficient of variation = std/expected return |
1.17 |

standard deviation = 9.91

coefficient of variance = 1.17

5)

State | Probability of State (P) |
Stock X (R) | P*R | P*R^2 |

weak | 10% | -20% | -2.00% | 0.40% |

Below average | 20% | -14% | -2.80% | 0.39% |

average | 30% | 15% | 4.50% | 0.68% |

above average | 10% | 22% | 2.20% | 0.48% |

strong | 30% | 70% | 21.00% | 14.70% |

Sum | 22.9% | 16.651% |

variance = 0.16651 - (0.229)^2

= 0.114069

standard deviation = sqrt(0.114069)

= 33.77%

coefficient variation = standard deviation/expected return

= 33.77/22.9

= 1.48

Quantitative Problem: You are given the
following probability distribution for CHC Enterprises:
State of Economy
Probability
Rate of return
Strong
0.25
22%
Normal
0.45
8%
Weak
0.3
-5%
What is the stock's expected return? Round your answer to 2
decimal places. Do not round intermediate calculations.
%
What is the stock's standard deviation? Round your answer to two
decimal places. Do not round intermediate calculations.
%
What is the stock's coefficient of variation? Round your answer
to two decimal places....

Quantitative Problem: You are given the
following probability distribution for CHC Enterprises:
State of Economy
Probability
Rate of return
Strong
0.25
19
%
Normal
0.45
9
%
Weak
0.30
-5
%
What is the stock's expected return? Do not round intermediate
calculations. Round your answer to two decimal places.
%
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...

Quantitative Problem: You are given the following probability
distribution for CHC Enterprises:
State of Economy Probability Rate of Return
Strong 0.2 19%
Normal 0.5 9%
Weak 0.3 -4%
What is the stock's expected return? Round your answer to 2
decimal places. Do not round intermediate calculations.
What is the stock's standard deviation? Round your answer to two
decimal places. Do not round intermediate calculations.
What is the stock's coefficient of variation? Round your answer to
two decimal places. Do not...

Quantitative Problem: You are given the
following probability distribution for CHC Enterprises:
State of Economy
Probability
Rate of return
Strong
0.25
18%
Normal
0.55
8%
Weak
0.2
-4%
What is the stock's expected return? Round your answer to 2
decimal places. Do not round intermediate calculations.
%
What is the stock's standard deviation? Round your answer to two
decimal places. Do not round intermediate calculations.
%
What is the stock's coefficient of variation? Round your answer
to two decimal places....

Quantitative Problem: You are given the
following probability distribution for CHC Enterprises:
State of Economy
Probability
Rate of return
Strong
0.2
22%
Normal
0.45
9
Weak
0.35
-4
What is the stock's expected return? Round your answer to 2
decimal places. Do not round intermediate calculations.
%
What is the stock's standard deviation? Round your answer to two
decimal places. Do not round intermediate calculations.
%
What is the stock's coefficient of variation? Round your answer
to two decimal places....

You are given the following probability distribution for CHC
Enterprises:
State of Economy
Probability
Rate of return
Strong
0.25
22%
Normal
0.45
9%
Weak
0.30
-6%
What is the stock's expected return? Do not round intermediate
calculations. Round your answer to two decimal places.
%
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...

Quantitative Problem: You are given the
following probability distribution for CHC Enterprises:
State of Economy
Probability
Rate of return
Strong
0.15
19
%
Normal
0.45
8
%
Weak
0.40
-6
%
What is the stock's expected return? Do not round intermediate
calculations. Round your answer to two decimal places.
%
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...

Quantitative Problem: You are given the
following probability distribution for CHC Enterprises:
State of Economy
Probability
Rate of return
Strong
0.15
21
%
Normal
0.50
8
%
Weak
0.35
-5
%
What is the stock's expected return? Do not round intermediate
calculations. Round your answer to two decimal places.
%
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...

Quantitative Problem: You are given the following probability
distribution for CHC Enterprises:
State of Economy Probability Rate of return
Strong 0.15 20%
Normal 0.5 9
Weak 0.35 -4
What is the stock's expected return? Round your answer to 2
decimal places. Do not round intermediate calculations. 6.10 %
What is the stock's standard deviation? Round your answer to two
decimal places. Do not round intermediate calculations. %
What is the stock's coefficient of variation? Round your answer
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You are given the following probability distribution for CHC
Enterprises:
State of Economy. Probability. Rate of Return
Strong 0.20 19%
Normal 0.50 9
Weak 0.30 -5
What is the stock's expected return? Do not round intermediate
calculations. Round your answer to two decimal places.
_%
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? Round your answer
to two decimal places. Do not...

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