Question

You plan to make an investment. given the following probability distribution of returns, what is the...

You plan to make an investment. given the following probability distribution of returns, what is the expected return on the investment ? if the standard deviation of the return is $77,460, what is the CV of the investment ?

market condition probability profit $000'

good 30% 300

normal 40% 200

bad 30% 100

0 0
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Answer #1

Expected return=Respective return*Respective probability

=(0.3*300,000)+(0.4*200,000)+(0.3*100,000)

=$200,000

CV=Standard deviation/Expected return

=77460/200000

=0.3873

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