P-1 EXPECTED RETURN A stock%u2019s returns have the following distribution: DEMA
ID: 2701530 • Letter: P
Question
P-1 EXPECTED RETURN A stock%u2019s returns have the following distribution:
DEMAND for the Probability of This Rate of Return If This
Company%u2019s Products Demand Occurring Demand Occurs
DEMAND for the PROBABILITY of this Rate of Return if
Companys Product Demand Occuring this Demand Occurs
Weak 0.1 (50%)
Below Average 0.2 (5)
Average 0.4 16
Above Average 0.2 25
Strong 0.1 60
1.0
Calculate the stock%u2019s expected return, standard deviation, and coefficient of variation.
Explanation / Answer
Demand P(probability) Rate (X) (X)*P X- Mean (X-Mean)^2 (X-Mean)^2*P
Weak 0.10 (50.00) (5.00) (61.40) 3769.96 377.00
Below avg 0.20 (5.00) (1.00) (16.40) 268.96 53.79
Average 0.40 16.00 6.40 4.60 21.16 8.46
Above avg 0.20 25.00 5.00 13.60 184.96 36.99
Strong 0.10 60.00 6.00 48.60 2361.96 236.20
Mean = sum of(Rate of return*P)= 11.40
Variance = sum of square of mean*probabiltity=712.44
Standard deviation = Square root of variance
=19.60
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