Question

The following are the expected outcomes for a corporation and the probabilities associated with each outcome.

If demand is               Outcome                                Probability

Poor                            0%                                           .10

Average                      10%                                         .40

Good                           15%                                         .30

Excellent                     20%                                         .20

First, Calculate the expected rate of return, r^, r with a hat.   Show all work!!!! 10 points

Next, Calculate the Standard Deviation, sigma    Show all work!!!!! 15 points

Finally, Calculate the Coefficient of Variation   Show all work!!!!!  2 points

Answer 1

D3 x : B A E F G H Fix +23-$C$8 C D Expected return [rxP(r)=u] r-u 0.00% -12.50%! 2 3 Return (r) 0% Probability [(P(r)] 0.10 (r-u)^2 1.56% P(r)x(r-u)^2 0.16% Coefficient of variation Standard deviation:Mean Coefficient of variation 0.45 =5.59%/12.5% 5 10% 15% 20% 0.40 0.30 0.20 4.00% 4.50% 4.00% -2.50% 2.50% 7.50% 0.06% 0.06% 0.56% 0.03% 0.02% 0.11% 8 Expected return 12.50% 9 0.31% Variance (o^2) Standard deviation (o) 5.59%

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