Question

Your rate of return expectations for the common stock of Gray Cloud Company during the next year are:
GRAY CLOUD CO.
Possible Rate of Return Probability
−0.10 ............ 0.25
0.00 ............ 0.15
0.10 ............ 0.35
0.25 ............ 0.25
a. Compute the expected return [E(Ri)] on this investment, the variance of this return (σ2), and its standard deviation (σ).
b. Under what conditions can the standard deviation be used to measure the relative risk of two investments?
c. Under what conditions must the coefficient of variation be used to measure the relative risk of two investments?



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  • CreatedDecember 17, 2014
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