8-1: A stocks returns have the following distribution: Demand for the Company\'s

Question

8-1: A stocks returns have the following distribution:

Demand for the Company'sProducts     Probability of This DemandOccuring   Return of demand if this demandoccurs

Weak                                                                     0.1                                                                     (50%)

Belowaverage                                                   0.2                                                                          (5)

Average                                                            0.4                                                                                 16

AboveAverage                                                0.2                                                                                25

Strong                                                                  0.1                                                                                60

                                                                             1.0

Calculate the stocks expected return, standard deviation andcoefficient of variation.

Explanation / Answer

1. = (0.1)(-50%) + (0.2)(-5%) + (0.4)(16%) + (0.2)(25%) + (0.1)(60%)

= 11.40%.

2. s2 = (-50%

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