Question

Expected return

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	0.2	-44%
Below average	0.1	-5
Average	0.5	10
Above average	0.1	25
Strong	0.1	53
	1.0

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

2. Calculate the stock's standard deviation. Do not round intermediate calculations. Round your answer to two decimal places.
   %

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

Answer 1

Solution :

a. The stock's expected return is = 3.50 %

b. The stock's standard deviation = 27.76 %

c.  The stock's coefficient of variation = 7.93

Please find the attached screenshot of the excel sheet containing the detailed calculation for the above solution.