Integrative-Expected return, standard deviation, and coefficient of variation An

Question

Integrative-Expected return, standard deviation, and coefficient of variation An asset is currently being considered by Perth Industries. The probability distribution of expected returns for this asset is shown in the following table, EEB a. Calculate the expected value of return, r, for the asset. b. Calculate the standard deviation, or, for the asset's returns c. Calculate the coefficient of variation, CV, for the asset's returns Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Pr 0.10 0.20 0.40 0.20 0.10 Return, r 40.00% 10.00% 0.00% -5.00% -10.00% 4 5 PrintDone

Explanation / Answer

a. Expected Return = 4.00%

b. Standard Deviation = 13.38%

c. Coefficient Of Variation = Standard Deviation/ Mean

= 13.38% /4.00%

= 3.345

Note :

Probability Stock A Expected Return ( Probability * Expected Return) 1 0.10 0.40 0.0400 2 0.20 0.10 0.0200 3 0.40 0.00 -  .00 4 0.20 (0.05) -0.0100 5 0.10 (0.10) -0.0100 Expected Return   0.0400 Expected Return   % 4.00

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