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    Probability Distribution and Coefficient of Variation

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    Ripken Iron Works faces the following probability distribution:

    State of the Probability of State Stock's Expected Return if
    Economy Occurring this State Occurs

    Boom 0.25 25%
    Normal 0.50 15
    Recession 0.25 5

    What is the coefficient of variation on the company's stock? (Assume that the standard deviation is calculated using the population statistic.)

    A. 0.06
    B. 0.47
    C. 0.54
    D. 0.67

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    Solution Summary

    This solution shows how to calculate the expected value, variance, standard deviation and finally coefficient of variation in an Excel file.