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 (24%) Below average 0.2 (12) Average 0.4 16 Above average 0.1 22 Strong 0.1 70 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.

Expected Sales=Respective sales*Respective probability

=(0.2*-24)+(0.2*-12)+(0.4*16)+(0.1*22)+(0.1*70)=8.4%

 probability Return probability*(Return-Expected Return)^2 0.2 -24 0.2*(-24-8.4)^2=209.952 0.2 -12 0.2*(-12-8.4)^2=83.232 0.4 16 0.4*(16-8.4)^2=23.104 0.1 22 01*(22-8.4)^2=18.496 0.1 70 0.1*(70-8.4)^2=379.456 Total=714.24%

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

=26.73%(Approx).

Coefficient of variation=Standard deviation/Expected Return

=(26.73/8.4)=3.18(Approx).

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