Chapter 01 – Appendix
Exhibit 1A.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Your expectations from a one-year investment in Wang Computers is as follows:
Probability
Rate of Return
.15
−.10
.15
−.20
.35
.00
.25
.15
.10
.15
1. Refer to Exhibit 1A.1. The expected return from this investment is
a.
−0.0752.
b.
−0.0040.
c.
0.00.
d.
0.0075.
e.
0.4545.
2. Refer to Exhibit 1A.1. The standard deviation of your expected return from this investment is
a.
0.001.
b.
0.004.
c.
0.124.
d.
1.240.
e.
None of these are correct.
3. Refer to Exhibit 1A.1. The coefficient of variation of this investment is
a.
−0.06.
b.
−0.65.
c.
6.60.
d.
16.53.
e.
165.10.
Exhibit 1A.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You have an opportunity to invest in project X with the following expected rates of return:
Probability
Rate of Return
.25
−.10
.25
.00
.50
.10
4. Refer to Exhibit 1A.2. The expected return for project X is
a.
0.0 percent.
b.
0.5 percent.
c.
2.5 percent.
d.
5.0 percent.
e.
7.5 percent.
5. Refer to Exhibit 1A.2. The standard deviation for project X is
a.
−1.581 percent.
b.
0.000 percent.
c.
1.581 percent.
d.
2.738 percent.
e.
5.000 percent.
6. An investment has a standard deviation of 12 percent and an expected return of 7 percent. What is the coefficient of
variation for this investment?
a.
1.714
b.
1.372
c.
0.714
d.
0.583
e.
0.500