Question

Need Standard Deviation

еВook Expected Return: Discrete Distribution A stock's return has the following distribution: Demand for the Probability of This Rate of Return if This Company's Products Demand Occurring Demand Occurs (%) Weak 0.1 -40% Below average 0.2 -8 Average 0.4 6 Above average 0.2 30 Strong 0.1 60 1.0 Calculate the stock's expected return and standard deviation. Do not round intermediate calculations. Round your answers to two decimal places. Expected return: 8.8 % Standard deviation: %

Answer 1

Solution :

The Expected Return of the stock = 8.8 %

The Standard Deviation of the stock = 25.4904 %

= 25.49 % ( when rounded off to two decimal places )

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

19.11.2019 - Microsoft Excel ? - X FILE 5 HOME = INSERT В PAGE LAYOUT FORMULAS DATA REVIEW VIEW ДА E Demand for the Company's products Variance = p * (D) (2) F Expected Return and Variance of the Stock Probability of Rate of Return if Expected Deviation % =D (D)? this demand this demand | Return% occuring occurs (%) (4) = (2) * (3) (5) = (3) -2 (4) (6) = (5)? 0.1 -40 -4.0 -48.8 2381.4400 0.2 -1.6 -16.8 282.2400 0.4 -2.8 7.8400 0.2 30 6.0 21.2 449.4400 0.1 6.0 2621.4400 { = 8.8 (p* (D)) = (05) = (1) Weak Below average Average Above average Thus Expected Return of the stock = 8.8% Variance of the stock = ( os)? = 649.7600 2.4 (7) = (2) * (6) 238.1440 56.4480 3.1360 89.8880 262.1440 649.7600 Strong 60 51.2 Standard Deviation of the stock = Square root of variance of the stock Standard Deviation of the stock = SQRT(H9) = O5 = 25.4904%