Question

The CFO of Brady Boots has estimated the rates of return to Brady's stock, depending on the state of the economy. He has also compiled analysts' expectations for the economy. Given this data, what is the company's coefficient of variation? What does it mean?

Economy	Probability	Return
Recession	0.1	-23%
Below average	0.1	-8
Average	0.4	6
Above average	0.2	17
Boom	0.2	24

Answer 1

: V E21 A X C B F (r-u)^2 fix =+B21-$D$27 D E Expected return [rxP(r)= u r- -2.30% -30.50% -0.80% -15.50% 2.40% -1.50% 3.40% 9.50% 4.80% 16.50% Return (r) -23.00% -8.00% 6.00% 17.00% 24.00% 22 Probability [(P(r)] 0.100 0.100 0.400 0.200 0.200 P(r)x(r-u)^2 0.00930 0.00240 0.00009 0.00181 0.00545 9.30% 2.40% 0.02% 0.90% 2.72% 23 24 25 27 Expected return | 7.50% 0.01905 Variance (12) Standard deviation (o) 13.80%

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Coefficient of variation = Coefficient of variation Standard deviation:Mean 1.840 =13.8%/7.5%

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