Calculate the coefficient of variation for the investment

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Q1. Michelle recently invested in real estate with the intention of selling the property one year from today. She has modeled the returns on that investment based on three economic scenarios. She believes that if the economy stays healthy, then her investment will generate a 30 percent return. However, if the economy softens, as predicted, the return will be 10 percent, while the return will be -25 percent if the economy slips into a recession. Assume the probabilities of the healthy, soft, and recessionary states are 0.6, 0.2, and 0.2, respectively. Calculate the coefficient of variation for the investment.

Q2. George knows that the beta of his portfolio is equal to 1, but he does not know the risk-free rate of return or the market risk premium. He also knows that the expected return on the market is 12.50 percent. What is the expected return on George's portfolio?

Reference no: EM133006990

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