Question

Kia Corp. believes the following probability distribution exists for its stock. What is the coefficient of variation on the company's stock? ( the stock variance of 48.509).

Economy, Probability, Expected return

Boom	0.19	25%
Normal	0.50	15%
Recession	0.31	5%

Answer 1

Stock
Scenario	Probability	Return%	=rate of return% * probability	Actual return -expected return(A)%	(A)^2* probability
Boom	0.19	25	4.75	11.2	0.00238336
Normal	0.5	15	7.5	1.2	7.2E-05
Recession	0.31	5	1.55	-8.8	0.00240064
	Expected return %=	sum of weighted return =	13.8	Sum=Variance Stock=	0.00486
			Standard deviation of Stock%	=(Variance)^(1/2)	6.97
			Coefficient of variation=	Std. dev./return=	0.5051