Question

Demand for the Company's Products	Probability of This Demand Occurring	Rate of Return If This Demand Occurs
Weak	0.2	(50%)
Below average	0.2	(14)
Average	0.3	10
Above average	0.2	24
Strong	0.1	52
	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.

Answer 1

Expected return=Respective return*Respective probability

=(0.2*-50)+(0.2*-14)+(0.3*10)+(0.2*24)+(0.1*52)

which is equal to

=0.20%

probability	Return	probability*(Return-Mean)^2
0.2	-50	0.2*(-50-0.20)^2=504.008
0.2	-14	0.2*(-14-0.20)^2=40.328
0.3	10	0.3*(10-0.20)^2=28.812
0.2	24	0.2*(24-0.20)^2=113.288
0.1	52	0.1*(52-0.20)^2=268.324
		Total=954.76%

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

which is equal to

=30.90%(Approx).

Coefficient of variation=Standard deviation/Expected value

=(30.90/0.20)

which is equal to

=154.50(Approx).