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Business, 14.03.2020 03:28 eviepack

Stand-alone risk is the risk an investor would face if he or she held only -Select-one portfolioone assetmultiple assetsCorrect 1 of Item 1. No investment should be undertaken unless its expected rate of return is high enough to compensate for its perceived -Select-riskcostreturnCorrect 2 of Item 1. The expected rate of return is the return expected to be realized from an investment; it is calculated as the -Select-combined sumstandard deviationweighted averageCorrect 3 of Item 1 of the probability distribution of possible results as shown below:The -Select- 4 of Item 1 an asset's probability distribution, the lower its risk. Two useful measures of stand-alone risk are standard deviation and coefficient of variation. Standard deviation is a statistical measure of the variability of a set of observations as shown below:If you have a sample of actual historical data, then the standard deviation calculation would be changed as follows:The coefficient of variation is a better measure of stand-alone risk than standard deviation because it is a standardized measure of risk per unit; it is calculated as the -Select-correlation coefficientrisk premiumstandard deviationCorrect 5 of Item 1 divided by the expected return. The coefficient of variation shows the risk per unit of return, so it provides a more meaningful risk measure when the expected returns on two alternatives are not -Select- 6 of Item 1.Quantitative Problem: You are given the following probability distribution for CHC Enterprises:State of Economy Probability Rate of return Strong 0.2 19% Normal 0.55 8% Weak 0.25 -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 round intermediate calculations.

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