Question

# A stock's returns have the following distribution: Demand for the Company's Products Probability of This Demand...

A stock's returns have the following distribution:

 Demand for the Company's Products Probability of This Demand Occurring Rate of Return If This Demand Occurs Weak 0.2 (40%) Below average 0.1 (11) Average 0.4 11 Above average 0.2 38 Strong 0.1 70 1.0
1. Calculate the stock's expected return. Round your answer to two decimal places.
%

2. Calculate the stock's standard deviation. Do not round intermediate calculations. Round your answer to two decimal places.
%

3. Calculate the stock's coefficient of variation. Round your answer to two decimal places.

1) Expected return is 9.90% calculated as below

 Demand Probability Return Probability * return Weak 0.20 -40.00 -8.00 Below average 0.10 -11.00 -1.10 Average 0.40 11.00 4.40 Above average 0.20 38.00 7.60 Strong 0.10 70.00 7.00 Expected Return 9.90

2)

 Probability Return Return-mean (Return-mean )2 Return-mean*Probability 0.20 -40.00 -49.90 2490.01 498.002 0.10 -11.00 -20.90 436.81 43.681 0.40 11.00 1.10 1.21 0.484 0.20 38.00 28.10 789.61 157.922 0.10 70.00 60.10 3612.01 361.201 Variance 1061.29

Standard deviation = = = 32.58

3) Stock's coefficient of variation= (standard deviation) / (expected value)

= 32.58/9.90

= 3.29