You need to complete this problem in a spreadsheet and show all your work. Creat

Question

You need to complete this problem in a spreadsheet and show all your work. Create an excel file that shows your calculations. Clearly indicate your final answer(s).

Assume that your company's chief economist puts together her projections for the sales of the next year for your company:

State of Economy

Probability  

Sales Growth Rate

Recession

12%

-5%

Slow Growth

20%

1%

Normal

35%

6%

Strong

28%

9.5%

Booming

5%

15%

a. What is the expected growth rate in sales for next year?

b. What is the standard deviation of the growth rate in sales for next year?

This must be in an excel spreadsheet that I can save and upload

State of Economy

Probability  

Sales Growth Rate

Recession

12%

-5%

Slow Growth

20%

1%

Normal

35%

6%

Strong

28%

9.5%

Booming

5%

15%

Explanation / Answer

Solution a & b)

Variance = 26.21

(b) S.D. = 5.12

Probability (1) Growth % (2) Expected Growth (1 * 2) Deviation from Expected growth [(2) - expected return] Square of Deviation Sq. of deviation * Probability 12% -5% -0.6 -10.11 102.21 12.26 20% 1% 0.20 -4.11 16.89 3.38 35% 6'% 2.10 0.89 0.79 0.28 28% 9.5% 2..66 4.39 19.27 5.40 5% 15% 0.75 9.89 97.81 4.89 Total (a) Expected return = 5.11%

Variance = 26.21

(b) S.D. = 5.12

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