You are given the following probability distribution for CHC Enterprises: What i

Question

You are given the following probability distribution for CHC Enterprises:

What is the stock's expected return? Round your answer to 2 decimal places. Do not round intermediate calculations.
%

What is the stock's standard deviation? Round your answer to two decimal places. Do not round intermediate calculations.
%

What is the stock's coefficient of variation? Round your answer to two decimal places. Do not round intermediate calculations.

State of Economy Probability Rate of return Strong 0.15 22% Normal 0.55 9% Weak 0.3 -4%

Explanation / Answer

stock's expected return:

Expected return = 22%*0.15+9%*0.55+-4%*0.3

=7.05%

----------------------

stock's standard deviation:

Stad Dev = sqrt(0.007225)

=8.50%

--------------------------------

coefficient of variation = std deviation/expected return

=8.50%/7.05%

=1.21

State of Economy Probability Rate of return Probability*return (expected return-return)^2 Deviation*probality Strong 0.15 22% 3.30% 2.24% 0.003353 Normal 0.55 9% 4.95% 0.04% 0.000209 Weak 0.3 -4% -1.20% 1.22% 0.003663 Expected return 7.05% Variance 0.007225

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