Standard deviation and coefficient of variation
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A stock's return has the following distribution:
Demand for the Probability of This Rate of Return
Company's Products Demand Occuring if This Demand Occurs
Weak 0.1 (50%)
Below Average 0.2 (5%)
Average 0.4 16%
Above average 0.2 25%
Strong 0.1 60%
If the stock's expected return = 11.4%, calculate standard deviation and coefficient of variation.
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Solution Summary
The solution explains how to calculate the standard deviation of returns and the coefficient of variation.
Solution Preview
In order to calculate the standard deviation, we need to first calculate the variance.
variance = Summation ( expected ...
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