Question

# Quantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Probability...

Quantitative Problem: You are given the following probability distribution for CHC Enterprises:

 State of Economy Probability Rate of return Strong 0.15 19 % Normal 0.45 8 % Weak 0.40 -6 %

What is the stock's expected return? Do not round intermediate calculations. Round your answer to two decimal places.

%

What is the stock's standard deviation? Do not round intermediate calculations. Round your answer to two decimal places.

%

What is the stock's coefficient of variation? Do not round intermediate calculations. Round your answer to two decimal places.

Expected return=Respective return*Respective probability

=(0.15*19)+(0.45*8)+(0.4*-6)

=4.05%

 probability Return probability*(Return-Expected Return)^2 0.15 19 0.15*(19-4.05)^2=33.525375 0.45 8 0.45*(8-4.05)^2=7.021125 0.4 -6 0.4*(-6-4.05)^2=40.401 Total=80.9475%

Standard deviation=[Total probability*(Return-Expected Return)^2/Total probability]^(1/2)

=(80.9475)^(1/2)

=9%(Approx)

Coefficient of variation=Standard deviation/Expected return

=9/4.05

=2.22(Approx)

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