Question

if using excel please show formulas so i know how to do.

Expected return A stock's returns have the following distribution: Demand for the Company's Products Weak Below average Average Above average Strong Rate of Return If Probability of This Demand Occurring 0.2 0.1 0.4 0.2 0.1 1.0 This Demand Occurs -50% -10 17 20 49 a. Calculate the stock's expected return. Round your answer to two decimal places. b. Calculate the stock's standard deviation. Round your answer to two decimal places. c. Calculate the stock's coefficient of variation. Round your answer to two decimal places.

Answer 1

Expected return=Respective return*Respective probability

=(0.2*-50)+(0.1*-10)+(0.4*17)+(0.2*20)+(0.1*49)=4.7%

Probability	REturn	Probability*(Return-Mean)^2
0.2	-50	0.2*(-50-4.7)^2=598.418
0.1	-10	0.1(-10-4.7)^2=21.609
0.4	17	0.4*(17-4.7)^2=60.516
0.2	20	0.2*(20-4.7)^2=46.818
0.1	49	0.1*(49-4.7)^2=196.249
		Total=923.61

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

=30.39%(Approx)

Coefficient of variation=Standard deviation/mean

=(30.39/4.7)=6.47(Approx).