Question

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	(44%)
Below average	0.2	(8)
Average	0.3	11
Above average	0.3	40
Strong	0.1	74
	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 returns*Respective probabilties

=(0.1*-44)+(0.2*-8)+(0.3*11)+(0.3*40)+(0.1*74)=16.7%

Probability	Return	Probability*(Return-Mean)^2
0.1	-44	0.1*(-44-16.7)^2=368.449
0.2	-8	0.2*(-8-16.7)^2=122.018
0.3	11	0.3*(11-16.7)^2=9.747
0.3	40	0,3(40-16.7)^2=162.867
0.1	74	0.1*(74-16.7)^2=328.329
		Total=991.41%

SD=[Total Probability*(Return-Mean)^2/Total Probability]^(1/2)

=31.49%(Approx).

CV=SD/mean

=(31.49/16.7)

=1.89(Approx).