Question

Q Search this course CENGAGE | MINDTAP Brigham Chapter 08 End-of-Chapter Problems 0 x Question 3 of 6 Check My Work (1 remaining) Problem 8-1 Expected return A stock's returns have the following distribution: Demand for the Probability of this Rate of Return If Company's Products Demand Occurring This Demand Occurs Weak .22% Below average Average Above average Strong a. Calculate the stock's expected return, Round your answer to two decimal places. b. Calculate the stock's standard deviation. Do not round intermediate calculations. Round your answer to two decimal places c. Calculate the stock's coefficient of variation. Round your answer to two decimal places. Check My Work (1 remaining) 0 loon Key

Answer 1

Ans a - Expected Return is 15.40%

Demand of Product	Probability	Rate of Returns	Probability * Returns
Weak	0.2	-22%	-4.40%
Below Average	0.1	-10%	-1.00%
Average	0.4	13%	5.20%
Above Average	0.1	40%	4.00%
Strong	0.2	58%	11.60%
Expected Return			15.40%

Ans b - Standard Deviation 27.75

Demand of Product	Probability	Rate of Returns	Probability * Returns	X - mean	p*(X - mean)^2
Weak	0.2	-22	-4.4	-37.4	279.752
Below Average	0.1	-10	-1	-25.4	64.516
Average	0.4	13	5.2	-2.4	2.304
Above Average	0.1	40	4	24.6	60.516
Strong	0.2	58	11.6	42.6	362.952
Expected Return			15.4		770.04
Variance	770.04
SD	27.75

SD is squire root of variance.

Ans - 3 Coefficient of variance is SD / Mean

= 27.75 / 15.40 = 1.80

Hope this helps.