Question

Complete showing all work for question #1

FIN 202 Chapter 8 Homework Problems Part 1 Problems: SHOW ALL WORK. A correct answer without formulas, calculator keystrokes or work will receive ZERO credit. 1. State of Economy Rate of Return Probability of State of Economy Boom Normal Recession 20% 7096 10% 21% 13% -9% Find the expected return, standard deviation, and the coefficient of variation for the information provided above Part 2

Answer 1

state of economy Returns probability deviation^2 deviation 2x probability deviation = Return (-) 12.4% Expected return (Return x probability) 0.04 0.01 Boom Normal Recession 21% 13% -9% 20% 70% 10% 0.09 0.09 0.01 -0.21 0.00 0.00148 0.00003 0.00458 0.05 -0.01 12.40% Expected return | Variance 0.00608 Standard deviation = variance^0.5 7.80% (0.006084 0.5] Expected return = 12.40% Standard deviation = 7.80% Coefficient of variation = std deviation : mean = 62.90% [7.80%/12.4% ]