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EXPECTED RETURN A stock's returns have the following distribution: Demand for the...

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Finance

EXPECTED RETURN

A stock's returns have the following distribution:

Demand for the Company's Products Probability of This Demand Occurring Rate of Return If This Demand Occurs
Weak 0.1 (38%)
Below average 0.2 (12)
Average 0.3 12
Above average 0.1 25
Strong 0.3 72
1.0

  1. Calculate the stock's expected return. Round your answer to two decimal places. %

  2. Calculate the stock's standard deviation. Do not round intermediate calculations. Round your answer to two decimal places. %

  3. Calculate the stock's coefficient of variation. Round your answer to two decimal places.

EXPECTED RETURNS

Stocks A and B have the following probability distributions of expected future returns:

Probability A B
0.2 (12%) (37%)
0.2 4 0
0.3 14 22
0.2 19 29
0.1 35 49

  1. Calculate the expected rate of return, rB, for Stock B (rA = 9.90%.) Do not round intermediate calculations. Round your answer to two decimal places. %

  2. Calculate the standard deviation of expected returns, A, for Stock A (B = 27.01%.) Do not round intermediate calculations. Round your answer to two decimal places. %

  3. Now calculate the coefficient of variation for Stock B. Round your answer to two decimal places.

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