The following probability distribution of expected returns have been determined
ID: 2763951 • Letter: T
Question
The following probability distribution of expected returns have been determined for Benko Corporation. First calculate the expected rate of return, r with ^ Now calculate the standard deviation Then calculate the coefficient of variation On a normal bell curve. 68.26% of the time, the actual returns will fall within +1 and - 1 deviations of the expected rate of return, r with ^. Therefore, Benko's actual rate of return should be no greater than % and no less than %68.26% of the time. That is. within one deviation of the expected rate of return.Explanation / Answer
In the cited case , Mean=X=0.30*12+0.40*15+0.20*25+0.10*0=14.6%
Variance=0.30*(12-14.6)^2+0.40*(15-14.6)^2+0.20*(25-14.6)^2+0.10*(0-14.6)^2=45.04
SD=Square Root of Variance=(45.04)^(1/2)=6.71
Coefficient of variation=SD/Mean=6.71/45.04=0.1489
In a stnadrad normal bell curve 68.26% of the time the actual return will fall within +1 and -1 SD of the Mean. So Banko's actual rate of return will be no greater than (45.04+6.71=51.75 and and no less than (45.04-6.71=38.33.
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