In: Finance
Stocks A and B have the following probability distributions of expected future returns:
Probability | A | B | ||
0.1 | (5 | %) | (35 | %) |
0.2 | 3 | 0 | ||
0.4 | 12 | 19 | ||
0.2 | 19 | 29 | ||
0.1 | 39 | 47 |
%
%
Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places.
Is it possible that most investors might regard Stock B as being less risky than Stock A?
-Select-IIIIIIIVVItem 4
Assume the risk-free rate is 4.5%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to four decimal places.
Stock A:
Stock B:
Are these calculations consistent with the information obtained from the coefficient of variation calculations in Part b?
-Select-IIIIIIIVV