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Quantitative Problem: You are given the following probability distribution for CHC Enterprises: State of Economy Probability...

Quantitative Problem: You are given the following probability distribution for CHC Enterprises:

State of Economy Probability Rate of return
Strong 0.15 20 %
Normal 0.55 9 %
Weak 0.30 -5 %

What is the stock's expected return? Do not round intermediate calculations. Round your answer to two decimal places.

%

What is the stock's standard deviation? Do not round intermediate calculations. Round your answer to two decimal places.

%

What is the stock's coefficient of variation? Do not round intermediate calculations. Round your answer to two decimal places.

Solutions

Expert Solution

Stock's Expected Return =0.15*20%+0.55*9%+0.30*-5% =6.45%
Stock's Standard Deviation =(0.15*(20%-6.45%)^2+0.55*(9%-6.45%)^2+0.30*(-5%-6.45%)^2)^0.5=8.3933%
Stock's Coefficient of Variation =Standard Deviation/Expected Return =8.3933%/6.45%=1.30

jeff jeffy answered 2 years ago
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