Question

EXPECTED RETURN

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	0.1	(24%)
Below average	0.3	(10)
Average	0.3	14
Above average	0.1	32
Strong	0.2	66
	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.

Answer 1

Stock
Scenario	Probability	Return	'=rate of return * probability	Actual return -expected return(A)	(A)^2* probability
Weak	0.1	-24.00%	-2.40%	-39.20%	0.015366
Below average	0.3	-10.00%	-3.00%	-25.20%	0.019051
Average	0.3	14.00%	4.20%	-1.20%	0.000043
Above average	0.1	32%	3.20%	16.80%	0.002822
Strong	0.2	66%	13.20%	50.80%	0.051613
	Expected return =	sum of weighted return =	15.20%	Sum=	0.088896
			Standard deviation of Stock	'=(sum)^(1/2)	29.82%
			Coefficient of variation=	STD DEV/RETURN=	1.961542