Question

Kia Corp. believes the following probability distribution exists for its stock. What is the coefficient of...

Kia Corp. believes the following probability distribution exists for its stock. What is the coefficient of variation on the company's stock? ( the stock variance of 48.509).

Economy, Probability, Expected return

Boom 0.19 25%
Normal 0.50 15%
Recession 0.31 5%
0 0
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Answer #1
Stock
Scenario Probability Return% =rate of return% * probability Actual return -expected return(A)% (A)^2* probability
Boom 0.19 25 4.75 11.2 0.00238336
Normal 0.5 15 7.5 1.2 7.2E-05
Recession 0.31 5 1.55 -8.8 0.00240064
Expected return %= sum of weighted return = 13.8 Sum=Variance Stock= 0.00486
Standard deviation of Stock% =(Variance)^(1/2) 6.97
Coefficient of variation= Std. dev./return= 0.5051
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