Question

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

State of Economy	Probability	Rate of return
Strong	0.25	18%
Normal	0.55	8%
Weak	0.2	-4%

What is the stock's expected return? Round your answer to 2 decimal places. Do not round intermediate calculations.
%

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

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

Answer 1

	Probability (P)	RETURN (X)	(P * X )	P * (X -Average Return of X)^2
STRONG	25%	18	4.5	24.5025
NORMAL	55%	8	4.4	0.0055
WEAK	20%	-4	-0.8	29.2820
		TOTAL	8.10	53.7900
Expected Return =		(P * X)
		8.10%
VARIANCE =		P * (X -Average Return of X)^2
		53.7900
Standard Deviation =		Square root of (P * (X -Average Return of X)^2)
		Square root of 53.79
		7.33
Coefficient of Variation =		Standard Deviation / Mean
		7.33 / 8.10
		0.90