A stock\'s returns have the following distribution: Demand for the Company\'s Pr

Question

A stock's returns have the following distribution: Demand for the Company's Products Probability of This Demand Occurring Rate of Return If This Demand Occurs Weak 0.1 -20% Below average 0.1 -15 Average 0.4 12 Above average 0.3 32 Strong 0.1 50 1.0

Calculate the stock's expected return. Round your answer to two decimal places.

Calculate the stock's standard deviation. Round your answer to two decimal places.

Calculate the stock's coefficient of variation. Round your answer to two decimal places.

Explanation / Answer

Probability Return Probability*Return Mean-Return Probability*(Mean-Return)^2 0.1 -20 -2 35.9 128.881 0.1 -15 -1.5 30.9 95.481 0.4 12 4.8 3.9 6.084 0.3 32 9.6 -16.1 77.763 0.1 50 5 -34.1 116.281 Mean= 15.9 424.49 Standard Deviation= [Probability*(Mean-Return)^2]^(1/2)= 20.6 Coefficient of Variation= Standard Deviation/ Mean= 1.3

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