Question

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

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 0.2 (44%) Below average 0.1 (6) Average 0.5 17 Above average 0.1 21 Strong 0.1 64 1.0

Calculate the stock's expected return. Round your answer to two decimal places.
%

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

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

Expected return=Respective return*Respective probability

=(0.2*-44)+(0.1*-6)+(0.5*17)+(0.1*21)+(0.1*64)=7.6%

 probability Return probability*(Return-Mean)^2 0.2 -44 0.2*(-44-7.6)^2=532.512 0.1 -6 0.1*(-6-7.6)^2=18.496 0.5 17 0.5*(17-7.6)^2=44.18 0.1 21 0.1*(21-7.6)^2=17.956 0.1 64 0.1*(64-7.6)^2=318.096 Total=931.24%

Standard deviation=[Total probability*(Return-Mean)^2/Total probability]^(1/2)
=30.52%(Approx)

Coefficient of variation=Standard deviation/expected value

=(30.52/7.6)=4.02(Approx).

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