Question

In: Finance

1a. Suppose you are holding stock A and there are three possibleoutcomes. Outcome 1...

1

a. Suppose you are holding stock A and there are three possible outcomes. Outcome 1 happens with 30% probability and -20% return. Outcome 2 happens with 35% probability and 20 return. Outcome 3 happens with 35% probability and 30% return. What is the Sharpe Ratio of stock A?



0.212



0.267



1.154



0.547

b.

At the beginning of the month, you sell short 200 shares of Wells Fargo that are currently selling at $45 per share. One month later you cover your short position at $52 per shares. During the month, Wells Fargo issued $2 dividend per share. What is you return during this month?



0.111



0.200



-0.200



-0.111



-0.156

Solutions

Expert Solution

1)0.547

2)-0.200


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