Question

Expected Return: Discrete Distribution

A stock's return has the following distribution:

Demand for the Company's Products	Probability of This Demand Occurring			Rate of Return if This Demand Occurs (%)
Weak		0.1		-25%
Below average		0.2		-9
Average		0.4		12
Above average		0.2		40
Strong		0.1		55
		1.0

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

Calculate the standard deviation. Round your answer to two decimal places.
%

Answer 1

Expected return

Expected return = 14%

Now calculate Deviation = Return - Expected return

	Prob	R	R - R'	(R-R')2	P×(R-R')2
W	0.1	-25	-39	1521	152.1
B A	0.2	-9	-23	529	105.8
A	0.4	12	-2	4	1.6
A A	0.2	40	26	676	135.2
S	0.1	55	41	1681	168.1
	1.0	R' = 14%	Variance		562.8

Variance = 562.8

Standard Deviation,

I have also calculated using excel attaching the picture of same. Refer the attached picture below

Please contact if having any query. My humble request help me will be grateful to you for your generous support. Thank you.