Bill Broodiest, star quarterback for the Spring Bay Smashers, would like to inve
ID: 2756213 • Letter: B
Question
Bill Broodiest, star quarterback for the Spring Bay Smashers, would like to invest a small portion of his earnings in stocks of one of three firms. His estimated dividends and the probabilities of their occurrence follow.
Galaxy Communications
.1
$750
.3
800
.4
900
.2
1,200
Grasshopper Tractor
.2
$0
.2
675
.4
750
.2
900
Breathiest Electronics
.1
$300
.2
600
.3
700
.4
1,100
.
A. Calculate the expected return for each stock
B. Calculate the cooefficient of variation for each stock.
C. Rank the three from most to least risky.
D. Which Stock would you recommend to Bill?
Galaxy Communications
.1
$750
.3
800
.4
900
.2
1,200
Explanation / Answer
Answer:1
Answer:2
a. Calculate the coefficient of variation for Galaxy Communications (round your answer to three decimal places). Probability Earning in stock Expected value P(U - X)^2 0.1 750 75 2,723 0.3 800 240 3,968 0.4 900 360 90 0.2 1,200 240 16,245 915 23,025 Mean 915.00 Standard deviation 151.74 coefficient of variation 16.58% b. Calculate the coefficient of variation for Grasshopper Tractor (round your answer to three decimal places). Probability Earning in stock Expected value P(U - X)^2 0.2 - - 75,645 0.2 675 135 720 0.4 750 300 7,290 0.2 900 180 16,245 615 99,900 Mean 615.00 Standard deviation 316.07 coefficient of variation 51.39% c. Calculate the coefficient of variation for Breathiest Electronics(round your answer to three decimal places). Probability Earning in stock Expected value P(U - X)^2 0.1 300 30 25,000 0.2 600 120 8,000 0.3 700 210 3,000 0.4 1,100 440 36,000 - - 800 72,000 Mean 800.00 Standard deviation 268.33 coefficient of variation 33.54%Related Questions
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