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 0.2 -38% Below average 0.1 -15 Average 0.3 17 Above average 0.3 32 Strong 0.1 62 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

returns deviation^2 x probability Economy Weak Below average Average Above average Strong -38.00% -15.00% 17.00% 32.00% 62.00% average return Probability 0.20 0.10 0.30 0.30 0.10 expected return [return x probability] -7.60% -1.50% 5.10% 9.60% 6.20% 11.80% deviation deviation^2 (returns-average) -49.80% 24.8004% -26.80% 7.1824% 5.20% 0.2704% 20.20% 4.0804% 50.20% 25.2004% variance = 4.9601% 0.7182% 0.0811% 1.2241% 2.5200% 0.09504 standard deviation = variance 10.5 30.83% 11.80% 30.83% Expected return Standard deviation Coefficient of variation (Standard deviation/Mean)