Deck 21: Web Appendix: A Review of Statistics and the Security Market Line

Question 1

The coefficient of variation of this investment is

A) -0.06
B) -0.65
C) 6.60
D) 16.53
E) 165.10

Answer 1

D
The coefficient of variation (CV) equals 0.124 / 0.0075 = 16.53

Question 2

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 the above

Answer 2

0.124

Question 3

The expected return from this investment is

A) -0.0752
B) -0.0040
C) 0.00
D) 0.0075
E) 0.4545

Answer 3

D
E(R) = (-0.10)(0.15) + (-0.20)(0.15) + (0.00)(0.35) + (0.15)(0.25) + (0.15)(0.10) = 0.0075