BUS
Finance Test 2 Chapter 6

# Finance Test 2 Chapter 6 - Expectedrateofretur CommonStockA...

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Expected ra Common Stock A Probability Return 0.25 12% 0.5 16% 0.25 18% Expected Rate for A is A6 (B6) + A7 (B7) + A8 (B8) IS 15.50% Expected Rate for B is D6 (E6) + D7 (E7) + D8 (E8) + D9 (E9) IS 9.80% Standard Deviation for A is {(12%-15.50%)^2 (0.25) + (16%-15.50%)^2(0.50)+(18%-15.50%)^2(0.25)}^.5 IS 2.18% 0.122500% 0 0.002500% 0 0.062500% 0 0.000000% 0.000000% 0.047500% STANDARD DEVIATION MEANS RISK Expected ra Common Stock A Probability Return 0.08 -75% 0.14 -10% 0.56 15% 0.14 45% 0.08 80%

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Expected Rate for A is A6 (B6) + A7 (B7) + A8 (B8) IS 13.70% Expected Rate for B is D6 (E6) + D7 (E7) + D8 (E8) + D9 (E9) IS 10.25% Standard Deviation for A is {(12%-15.50%)^2 (0.25) + (16%-15.50%)^2(0.50)+(18%-15.50%)^2(0.25)}^.5 IS 34.61% 78.676900% 0.06 5.616900% 0.01 0.016900% 0 9.796900% 0.01 43.956900% 0.04 ###
ate of retur Probability 0.15 0.35 0.35 0.15 ate of retur Probability 0.15 0.35 0.35 0.15

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rn and risk Common Stock B Return -6% 6% 16% 20% Standard Deviation for B is {(-6%-9.80%)^2 (0.15) + (6%-9.80%)^2(0.35)+(16%-9.80%)^2(0.35)+(20%-9.80%)^2(.15)^.5

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