Compute the total risk-free return for a horizon of 7 years and effective annual rate (EAR)...

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Compute the total risk-free return for a horizon of 7 years and effective annual rate (EAR) for a (risk-free) discount bond with a maturity of T years and par value of $100 under the following circumstances: 1. P(T) = $99.35, T = 0.25 ( 2. P(T) = $73.65, T = 4 Problem 2. The return on a stock is characterized by the following distribution: Scenario Probability Holding-period return Good Indifferent Bad Assuming a risk-free return of 2.35%, compute the following for the stock: 1. Expected return 2. Variance of the return 3. Standard deviation of the return 4. Sharpe ratio 0.40 0.55 0.05 11.55% 6.25% -9.90% Compute the total risk-free return for a horizon of 7 years and effective annual rate (EAR) for a (risk-free) discount bond with a maturity of T years and par value of $100 under the following circumstances: 1. P(T) = $99.35, T = 0.25 ( 2. P(T) = $73.65, T = 4 Problem 2. The return on a stock is characterized by the following distribution: Scenario Probability Holding-period return Good Indifferent Bad Assuming a risk-free return of 2.35%, compute the following for the stock: 1. Expected return 2. Variance of the return 3. Standard deviation of the return 4. Sharpe ratio 0.40 0.55 0.05 11.55% 6.25% -9.90%

Answer rating: 100% (QA)

SOLUTION To compute the total riskfree return for a horizon of 7 years and effective annual rate EAR for a discount bond we need to use the following ... View the full answer