Rate of Return/Probability 5% 0.10 10% 0.10 15% 0.10 20% 0.15 25% 0.20 30% 0.15

Question

Rate of Return/Probability

5% 0.10

10% 0.10

15% 0.10

20% 0.15

25% 0.20

30% 0.15

35% 0.05

40% 0.10

45% 0.05

Score: 0 of 10 pts 6 of 10(2 complete) HW Score: 20%, 20 of 100 pts P8-10 (similar to) Question Help * Assessing return and risk Swift Manufacturing is evaluating an asset purchase. The annual rate of return and the related probabilities given in the following table summarize the firm's analysis to this point: a. Compute the range of possible rates of return. b. Compute the expected return c. Compute the standard deviation of the returns. d. Compute the coefficient of variation of the returns. a. The range of possible rates of return is! %. (Round to the nearest whole number) Enter your answer in the answer box and then click Check Answer. Clear AlI Check Answer

Explanation / Answer

1) Range = Highest - Lowest values = 45 - 5 = 40% .................is the final answer

2) Expected return = Total ( X * P) = 23.5 % .................is the final answer

3) Standard deviation = Square root of Total ( P * Dx2) = Sqrt ( 125.25) = 11.19 ............. is the final answer

4) Coefficient of variation = Standard deviation / Expected return = 0.4761 ............is final answer

(or) ...........47.61 is the final answer if required in %

Working calculations are as under

(1) ......Dx = Deviation in X values ..........i.e x - 23.5

(2) .....P * Dx2 = Dx * Dx * Probability

X P X * P Dx Dx2 P * Dx2 5 0.1 0.5 -18.5 342.25 34.225 10 0.1 1 -13.5 182.25 18.225 15 0.1 1.5 -8.5 72.25 7.225 20 0.15 3 -3.5 12.25 1.8375 25 0.2 5 1.5 2.25 0.45 30 0.15 4.5 6.5 42.25 6.3375 35 0.05 1.75 11.5 132.25 6.6125 40 0.1 4 16.5 272.25 27.225 45 0.05 2.25 21.5 462.25 23.1125 Expected return = 23.5 Total 125.25

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