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 0.1 (40%) Below average 0.2 (9) Average 0.4 15 Above average 0.1 28 Strong 0.2 71 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

=(0.1*-40)+(0.2*-9)+(0.4*15)+(0.1*28)+(0.2*71)=17.2%

 probability Return probability*(Return-Mean)^2 0.1 -40 0.1*(-40-17.2)^2=327.184 0.2 -9 0.2*(-9-17.2)^2=137.288 0.4 15 0.4*(15-17.2)^2=1.936 0.1 28 0.1*(28-17.2)^2=11.664 0.2 71 0.2*(71-17.2)^2=578.888 Total=1056.96%

Standard deviation=[Total probability*(Return-Mean)^2/Total probability]^(1/2)
=32.51%(Approx)

Coefficient of variation=Standard deviation/MEan

(32.51/17.2)

=1.89(Approx).

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